MARKET REPORT: Car finance reprieve revs up Lloyds and Close Bros as chancellor steps in amid fears of industry chaos
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Shares in lenders caught up in the car finance scandal rose after Rachel Reeves launched a bid to shield them from multibillion-pound payouts in a landmark mis-selling case. In some much-need respite for investors, Close Brothers jumped 21.6 per cent, or 52.8p, to 297.6p and Lloyds Banking Group added 4 per cent, or 2.34p, to 61p.
Close Brothers remains down some 60 per cent since the start of last year, however. Lloyds, which owns the country’s largest car finance lender Black Horse, has fared far better as motor loans make up a smaller part of its overall business. Both have been caught up in a mis-selling case surrounding hidden commissions related to car loans that has left the industry facing a compensation bill estimated by some of £44billion.
It has been dubbed ‘PPI on wheels’ following the payment protection insurance scandal. Car finance scandal: In some much-need respite for investors, Close Brothers jumped 21.6%, or 52.8p, to 297.6p and Lloyds Banking Group added 4%, or 2.34p, to 61p.
But the Chancellor fears the case could cause chaos in the motor finance and car industry – making it harder for drivers to get loans. Around 80 per cent of new vehicles in the UK are bought using such loans. The Treasury has now sought permission to intervene in a forthcoming Supreme Court case – potentially depriving motorists of a hefty compensation payment.
A Treasury spokesman said: ‘We want to see a fair and proportionate judgement that ensures compensation to consumers that is proportionate to the losses they have suffered – and allows the motor finance sector to continue playing its role in supporting millions of motorists to own vehicles.’.
