The chancellor, Rachel Reeves, is reportedly exploring options to mitigate potential losses for major UK lenders by considering a legislative override of the supreme court’s decision, should it uphold a ruling that could expose banks to billions in compensation claims, according to sources familiar with the matter.
The debate centers on a Court of Appeal verdict last October, which found that failing to disclose commission arrangements between lenders and brokers to borrowers was unlawful. If the supreme court affirms this decision next week, lenders could face liabilities of up to £44bn. Officials from the Treasury, the Ministry of Justice, and the Department for Business and Trade have reportedly discussed whether new laws could be introduced retroactively to limit these obligations.
Such a step would mark a significant governmental intervention, following Reeves’ earlier, contentious attempt to influence the case in January. The financial sector has been closely watching whether the court will fully endorse the appeal ruling, which would redefine transparency requirements on broker commissions in car loans and possibly other credit arrangements.
Legal experts note that these rules fall under common law, meaning reforms would require new legislation to shift authority from judicial precedent to parliamentary oversight. A retroactive law could drastically reduce compensation payouts for banks like Lloyds, Santander, Barclays, and Close Brothers, shielding them from broader risk across financial products beyond automotive loans.
The discussions follow sustained pressure from industry groups, including the Financing & Leasing Association and Lloyds Banking Group, the latter of which has already allocated £1.2bn for potential claims. While retroactive laws are unusual and often contentious, they have been used before—most notably in 2013, when the government introduced legislation to block a £130m welfare-related payout, arguing it was necessary to safeguard public finances.
Government officials are reportedly cautious about appearing to undermine judicial independence. Nevertheless, there is mounting unease over the economic fallout if the ruling goes against lenders.
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