Charlie Nunn, Chief Executive of Lloyds Banking Group, has welcomed the government’s decision to intervene in a historical car financing case and the hope that it will help to clarify an industry under legal and regulatory pressure.
His comments follow on the announcement of the treasury that the permission will ask to create his concerns in a crucial hearing of the Supreme Court planned for April. The case stems from a decision of the Court of Appeal of October, which, if confirmed, could expose motorcycle provision providers to billions of pounds to compensation claims.
“We certainly welcome the intervention. We simply believe that the market needs clarity, “Nunn said reporters during the World Economic Forum in Davos. Emphasizes that up to 80 percent of the new car buyers and a large segment of the second -hand buyers rely on finance, he noted: “We need a well -functioning motorcycle financing industry that supports consumers.”
The decision of the Court of Appeal broadened, which was initially a more limited investigation by the Financial Conduct Authority (FCA). The result has led to widespread fears for a compensation account on a scale comparable to the notorious payment protection insurance (PPI) scandal, which cost the banking sector around £ 50 billion. Analysts at Moody’s have estimated the potential story at a maximum of £ 30 billion, while HSBC places the figure as high as £ 44 billion.
Lloyds, the largest supplier of Motor Finance, has already reserved £ 450 million to cover possible compensation. However, city analysts suspect that the sum can increase if the Supreme Court maintains the decision of the Court of Appeal. The threat of spiral obligations has weighed heavily on the stock price of Lloyds in the past year.
The involvement of the treasury reflects a desire to prevent disruption in the motorcycle financing market and to ensure that any compensation that is imposed on lenders is “proportionate”. Nunn argues that the decision of the Court of Appeal is “at odds with 30 years of regulation”, and emphasizes that it raises “broader investment questions about the UK”.
“We have had many of our investors who asked how the regime regime can be retrospectively overwritten, so easily by the Court of Appeal,” he said, warning that continuous uncertainty could deter the future investments in the financial services of Great Britain.
The FCA, which started the first investigation into discretionary committees paid by lender to car dealers, has been taken under fire because of its broad and retrospective approach. Discretionary committees were banned at the beginning of 2021, but the regulator investigates practices that extend until 2007. Some figures in the industry criticize the FCA privately for feeding market uncertainty and extending the dispute.
With the Supreme Court that appeals to the case in April, lenders and policy makers will hope for a definitive statement that balances the interests of consumers with the stability of a critical sector of the British economy.