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Investing.com -- Lloyds Banking Group (LON:LLOY), Close Brothers (F:CBRO) Group plc, and other UK lenders are responding to the Supreme Court’s recent ruling on motor finance commissions, as the Financial Conduct Authority (FCA) prepares a consultation on potential redress.
Shares of Lloyds Banking Group, Close Brothers Group, Secure Trust Bank, Barclays (LON:BARC), S&U PLC, CBRO, STBS, and SUS traded higher between 2% to 19%, as of ET 04:45 (GMT 08:45).
The judgment, handed down on Friday, overturned key elements of a previous Court of Appeal decision in the long-running Wrench, Johnson, and Hopcraft cases. The Supreme Court found that motor dealers acting as credit brokers do not owe fiduciary duties to customers and that commissions paid in this context do not constitute bribes.
However, the court ruled in the Johnson case that an unfair relationship existed between the lender and borrower under the Consumer Credit Act 1974.
The court emphasized that the assessment of unfairness is highly fact-specific, and in this case, ordered the repayment of commission along with commercial interest to the claimant.
Lloyds said its existing motor finance provision had already incorporated a range of possible outcomes, including the one now delivered by the Supreme Court. While the ruling provides clarity on fiduciary duty and bribery, Lloyds cautioned that regulatory uncertainty remains, particularly in light of the FCA’s next steps.
On Saturday, the FCA announced it will launch a consultation by early October on a possible industry-wide redress scheme linked to discretionary commission arrangements. It may also consider extending the scope to include other commission models.
Lloyds added that, based on an initial review and pending the FCA consultation, any adjustment to its provision is unlikely to be material. The bank said it will continue monitoring developments and will update the market as needed.
Close Brothers Group plc and Close Brothers Finance plc, in a follow-up to their 2 August announcement, acknowledged the FCA’s intention to consult on an industry-wide redress scheme.
The group said it welcomes the consultation process and intends to actively engage with the regulator as it moves forward.