Car finance scandal: lenders' shares surge after supreme court ruling

Shares in UK lenders surged yesterday after a favourable supreme court ruling slashed the anticipated bill for companies engulfed in the car finance scandal.

- Kalyeena Makortoff

The specialist lender Close Brothers, the most exposed to the scandal, closed 23.5% up, while the UK's biggest motor loan provider, Lloyds Banking Group, rose 9% to hit a 10-year high.

Shares in Barclays, which no longer provides car finance but is dealing with the fallout for the remaining loans on its books, rose by 1.6%.

Shares in FirstRand, one of the lenders involved in the supreme court case, were up 2.4%.

The motor finance industry, which ranges from big banks such as Lloyds and Santander UK to specialist lenders and the finance arms of carmakers such as Ford and BMW, dodged a collective £44bn compensation bill after the supreme court broadly sided with lenders in a ruling on Friday.

The Financial Conduct Authority (FCA) subsequently announced plans for a much smaller redress scheme, which is expected to cost lenders between £9bn and £18bn.

The scheme will help draw a line under the car finance scandal, compensating millions of drivers who were overcharged as a result of controversial commission arrangements between lenders and car dealers as far back as 2007.