Chancellor Rachel Reeves has been told to stay out of the car finance scandal as reports emerge that the Labour Government could override a Supreme Court decision to save lenders. On Friday, reports emerged that the Chancellor could step in and change the law to cut liabilities for lenders in a major decision.
According to The Guardian, officials have been discussing the possibility of superseding a Supreme Court decision that could save banks and lenders. However, Darren Smith, Managing Director at Courmacs Legal, urged Labour to leave the issue alone and let the case run its course. He stressed that he was baffled that the Government was even thinking of lowering the “redress” owed to car finance victims and called the move “unconscionable”.
Darren said: “It is outrageous and an affront to the rule of law that the Treasury is even considering giving motor finance giants a free pass at the expense of millions of hard-working consumers.
The legal expert added: “Why is the Government even considering limiting or reducing the redress car finance victims would receive at court? The billions owed to victims would undoubtedly help generate economic growth just as in the PPI scandal. Doing right by consumers is also good for the UK economy.
“If our highest courts determine consumers have been wronged by lenders, it would be unconscionable for the Government to send Labour MPs into the division lobbies and make them vote to limit the liabilities of big banks at the expense of their constituents.
“This is something which I, and many of my colleagues in the legal profession feel strongly about.”
It is very possible that judges could uphold a Court of Appeal ruling that said it was unlawful for brokers to receive commissions for motor finance loans without disclosing terms and conditions. Reeves’ interference could cover existing and historical contracts and possibly reduce a £44 billion bill for lenders.
There are concerns over the effect on the economy if some of Britain’s top banks and lenders have to pay out billions in payments. It is claimed that the Financing & Leasing Association (FLA) has claimed the scale of compensation could disrupt the car finance market.
They warned it may result in providers offering fewer and even more expensive loans, with some companies likely to go completely bust.
A Treasury spokesperson said: “We don’t comment on speculation. We want to see a balanced judgment that delivers compensation proportionate to losses that consumers have suffered and allows the motor finance sector to continue supporting millions of motorists to own vehicles. It is now appropriate to let the appeals process run its course.”
Express.co.uk has contacted the Treasury for further comment.