Santander UK has set aside £295 million to potentially compensate customers affected by the mis-selling of car loans, as the controversy surrounding the motor finance industry continues to escalate. The bank’s provision comes amid concerns that the mis-selling scandal could lead to a redress bill of up to £30 billion, with Santander’s move contributing to nearly £1 billion in compensation provisions across the industry so far.

The issue stems from a wide-ranging review by the Financial Conduct Authority (FCA) into potentially unfair commissions in motor finance deals, which has prompted several lenders to set aside funds. Santander’s decision follows a landmark Court of Appeal ruling last month that expanded the scope of the issue and raised the possibility of mass redress for consumers.

The Court of Appeal judgment significantly widened the legal requirements around commission disclosures in motor finance agreements. The ruling found that any commission not properly disclosed or consented to by the borrower was unlawful, making lenders liable for repaying affected customers. This shift in legal interpretation has sent shockwaves through the industry, with lenders revising their practices and temporarily suspending some operations.

Santander’s provision, disclosed in its third-quarter figures, includes estimates for operational and legal costs, as well as potential compensation. The bank acknowledged significant uncertainties regarding the extent of any misconduct, stating that the financial impact could be either higher or lower than the amount set aside. The decision to make provisions follows growing expectations that lenders will be forced to compensate customers due to these mis-selling practices.

The provision also contributed to a sharp decline in Santander UK’s pre-tax profits, which dropped to £143 million for the three months ending in September, down from £558 million during the same period last year. The bank joins other major lenders, including Lloyds Banking Group, which has set aside £450 million for similar issues.

The controversy began in early 2021 when the FCA banned discretionary commissions, which were linked to the interest rates customers paid on loans. The commission arrangements were seen as encouraging dealers to sell more expensive credit to customers. The FCA’s subsequent investigation into these practices has sparked consumer complaints, leading to a review of contracts dating back to 2007.

The Court of Appeal ruling in October compounded the issue, calling into question the adequacy of current FCA regulations. Critics, including the head of the Finance & Leasing Association, have argued that the lack of regulatory clarity allowed the court to intervene, exacerbating confusion in the market. As the legal and financial consequences unfold, the industry awaits further clarity from the Supreme Court, which may ultimately decide the future of compensation claims.

Thousands of farmers gathered in Westminster to protest the government’s proposed inheritance tax reforms, which they argue will jeopardize family-owned farms and threaten their future. The rally, organized by the National Farmers’ Union (NFU), was held at Church House, where attendees expressed their anger over the government’s failure to consult with the farming community before announcing the policy changes.

Tom Bradshaw, president of the NFU, received a standing ovation from the 600 farmers present as he condemned the proposed reforms as “the straw which broke the camel’s back.” Bradshaw criticized the government for pushing forward with the policy without consulting the farming sector, calling it a betrayal. “To launch a policy this destructive without talking to anyone in farming beggars belief,” he said. He also highlighted the severe inflation and difficult weather conditions that farmers have faced over the past 18 months, emphasizing that the sector had already given all it could. “It’s wrong on every level and, just as bad, it won’t achieve what the Treasury wants to achieve,” he added.

The government’s inheritance tax reforms are aimed at raising £520 million annually by 2029, targeting wealthy individuals who invest in large estates to reduce their tax liabilities. However, Bradshaw warned that the reforms would have unintended consequences. He argued that they could incentivize people to withdraw money from pensions to invest in agricultural land, potentially undermining the policy’s intended goal.

In an emotional address, Bradshaw spoke of the “unacceptable human impact” on elderly farmers, many of whom risk losing their life’s work under the proposed changes. “We know that any tax revenue raised will be taken from our children and raised from those who die in tragic circumstances or within the next seven years,” he said.

A key point of contention is the government’s seven-year gifting rule, which exempts gifts from inheritance tax if the giver survives for seven years after the transfer. Farmers argue that this rule would not apply to them, as many rely on pensions from the farm after passing it to the next generation. Additionally, if farmers continue living on the land, they would need to pay rent to avoid inheritance tax charges.

Farming leaders have accused the Treasury of working with flawed data, citing discrepancies between Agricultural Property Relief (APR) claims and Business Property Relief (BPR) claims, which are vital for machinery and livestock. The NFU insists that Treasury officials have overlooked the full scope of the tax reliefs that farmers rely on.

The rally’s charged atmosphere was underscored by a direct message to the government: “Government needs to halt this policy. The policy is broken and based on the wrong evidence.” Farmers also expressed their frustration with Labour, which, while in opposition, had promised not to alter inheritance tax. Sir Keir Starmer had assured farmers at the NFU conference in 2023 that his party would provide “certainty” for the sector.

As tensions mount, the farming community remains steadfast in its demand for the government to reconsider the inheritance tax reforms, warning of long-term damage to family-owned farms across the UK.