(Bloomberg) — The boss of Lloyds Banking Group Plc said he welcomed the UK government’s recent decision to intervene in a landmark court case over controversial car loans, saying the move could help keep Britain investable.
Chancellor Rachel Reeves-led Treasury this week said it’s told the Supreme Court that the case over historic practices at motor finance businesses has the potential to cause considerable economic harm. In an interview on Thursday, Lloyds Chief Executive Officer Charlie Nunn said he welcomed the government “getting involved in the case.”
“We are concerned both to make sure that the auto finance and motor finance industry can continue to support customers well, but also that we can remain an investable location where international investors can think regulation and the rule of law is predictable is a really important issue,” Nunn told Bloomberg Television’s Francine Lacqua in Davos, Switzerland, where he is attending the World Economic Forum.
Car loans have come under scrutiny after consumers alleged their loans were priced in a way that treated them unfairly while banks pocketed money in so-called discretionary commission arrangements with dealers, a practice banned in 2021. The Supreme Court is scheduled to hear an appeal by lenders against a lower court decision last year that ruled it illegal for banks to pay commission without obtaining the customer’s informed consent.
Analysts at Bank of America Corp. recently estimated that the industry could face as much as £38 billion ($47 billion) in costs tied to the saga. Lloyds alone, the biggest provider of car finance, could be on the hook for £3 billion, they found. The bank has has already set aside £450 million ($589 million) to pay for possible compensation and other costs.
Commenting on the need to get the UK economy humming again, Nunn said that the industry is expecting supply-side reform with a focus on regulation.
“We now need to see action and an accelerated pace of impact for our customers in the UK,” he said. There’s “an opportunity to get people to be able to take the appropriate level of risk and get the economy going as the regulator prioritizes competitiveness and growth.”
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