The Treasury is seeking to intervene in a landmark Supreme Court case that could expose Britain’s motor finance industry to a mis-selling crisis on a scale comparable to the notorious PPI scandal. The government is urging the court to consider the broader implications for investor confidence in the UK’s regulatory framework and to ensure any compensation awarded is “proportionate.”

The Supreme Court will decide whether to permit the Treasury’s intervention, but the move highlights mounting concerns over potential liabilities for motor finance providers. Analysts estimate these liabilities could reach £44 billion, approaching the £50 billion total banks paid in PPI claims.

A Treasury spokesperson said: “We want to see a fair and proportionate judgment that ensures compensation to consumers that is proportionate to the losses they have suffered and allows the motor finance sector to continue supporting millions of motorists.”

Market Reaction

The announcement provided a lift to banks involved in motor finance. Close Brothers, a merchant bank with significant car finance operations, saw its shares surge by 20% to 294p. Lloyds Banking Group, owner of Black Horse vehicle finance, experienced a 4% increase to 61p.

RBC Capital Markets called the Treasury’s involvement “clearly positive for the UK banks with motor finance exposure.” However, it cautioned that the ultimate decision rests with the five Supreme Court judges.

Industry Alarm

The case follows an October Court of Appeal ruling that undisclosed commissions on motor loans were unlawful, leaving lenders liable to refund borrowers. The Financial Conduct Authority (FCA) has been scrutinizing the sector’s commission practices, with its review reaching back to April 2007.

As vehicle financing underpins approximately 80% of car purchases in the UK, the potential fallout could be enormous. Banks have already begun preparing for potential payouts. Lloyds has set aside £450 million, while Santander’s UK division holds £295 million. Close Brothers has yet to make provisions but recently suspended its dividend and sold its wealth management arm to raise £400 million in capital.

High Stakes

Jefferies analysts emphasized the importance of proportionate compensation. “The argument that any compensation due should be proportionate is key,” they stated.

If the Supreme Court upholds the Court of Appeal’s decision in April, lenders could face a wave of refunds, forcing a costly restructuring across the sector similar to the PPI debacle.

For now, the Treasury’s intervention provides some optimism for motor finance firms while underscoring the high stakes in what could become one of Britain’s most significant financial crises.

Bitcoin surged to a new all-time high ahead of Donald Trump’s second-term inauguration, topping $109,000 before settling at $108,214, marking a 6.5% increase. This surge in the popular cryptocurrency reflects growing optimism that the incoming administration will adopt a more favorable stance towards digital assets.

The rise in Bitcoin’s price, often referred to as the “Trump effect,” has spurred hopes that the president will use his executive powers to ease the regulatory burden on crypto firms. Investors are optimistic that Trump will integrate digital currencies into the mainstream financial system. Trump, who initially expressed skepticism about cryptocurrencies, has recently reversed course, pledging to make America the “crypto capital of the planet” and to create a “strategic reserve” of Bitcoin.

Reports indicate that Trump may sign an executive order early in his presidency to establish a “crypto advisory council,” a proposal he first mentioned in July. Additionally, Trump is expected to remove Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), who has been a leading figure in the regulatory crackdown on the crypto industry. Gensler is reportedly stepping down on Monday in anticipation of his dismissal.

In a further push to embrace digital currencies, Trump launched a new “meme coin,” called $Trump, over the weekend, while his wife, Melania Trump, introduced her own token, $Melania. The couple has also ventured into the cryptocurrency space through World Liberty Financial, a family-run business focused on trading digital assets.

The promise of a crypto-friendly White House has also provided a boost to traditional markets. The FTSE 100 saw a modest rise of 0.14%, closing at 8,518.12, while the British pound strengthened by 0.18% against the dollar, reaching $1.2197. Investors are hopeful that Trump’s anticipated flurry of executive orders, potentially as many as 200 on his first day, will stimulate both the digital currency and equity markets.

Bitcoin, which was virtually worthless when it was created in 2008, has seen a dramatic rise in value. Five years ago, it was trading at just $7,333, and it crossed the $100,000 mark early last month. The cryptocurrency’s rise is further fueled by expectations that Trump’s administration will help integrate digital currencies into the financial mainstream, making them more accessible and appealing to a broader range of investors.