Banco Santander is reportedly considering separating its car finance division from the rest of its UK operations as part of a broader corporate restructuring, as fears mount over potential redress on motor finance commission.
Lenders must wait until the summer to hear whether a Supreme Court appeal will overturn the notion that lenders and their partner car dealerships have unfairly treated customers due to the finance commission being paid to dealers to help arrange car loans.
Analysts at RBC Capital believe Santander, which partners car brands including BYD, Volvo and MG, may face up to £1.9bn in claims should the Supreme Court overturn the appeal by lenders, while Moody’s has warned that the total bill across the industry could reach £30bn.
Banco Santander is reportedly considering separating its car finance division from the rest of its UK operations as part of a broader corporate restructuring, as fears mount over potential redress on motor finance commission.
Lenders must wait until the summer to hear whether a Supreme Court appeal will overturn the notion that lenders and their partner car dealerships have unfairly treated customers due to the finance commission being paid to dealers to help arrange car loans.
Analysts at RBC Capital believe Santander, which partners car brands including BYD, Volvo and MG, may face up to £1.9bn in claims should the Supreme Court overturn the appeal by lenders, while Moody’s has warned that the total bill across the industry could reach £30bn.
Lloyds, the largest provider of motor loans through its Black Horse division, has already put aside a total of £1.2bn for potential compensation, with its latest provision contributing to a 20% drop in annual profits.
Santander has also provisioned £295m for commissions paid by consumers on motor finance to cover potential liabilities and was forced to delay its financial results in light of the court ruling.
Bloomberg reports that Santander chiefs are mulling a move to separate out its consumer finance division to make the business more attractive to potential buyers, should the final outcome of the Supreme Court ruling go against lenders.
The proposed reorganisation would involve shifting the bank’s consumer finance arm – home to its motor lending business – out of the Santander UK structure which would require approval from financial regulators.
Since its launch in the UK in 2005, Santander Consumer Finance has funded over 3.2 million vehicles, providing more than £40 billion of loans and partners with over 4,500 dealers.
It is the funding partner of Volvo Car UK, through its joint venture Volvo Car Financial Services UK, and since 2020 also partners MG, through its MG Motor Financial Services brand.
And in 2023, as China’s BYD prepared to launch in the UK, Santander signed an agreement to provide its point of sale finance.
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