FCA announces compensation review for car loan scandal as markets react

In the United Kingdom, the Financial Conduct Authority (FCA) has announced plans for a consultation review regarding compensation related to the recent car loan scandal. This decision follows a ruling from the Supreme Court, which declared that hidden commission payments between lenders and car dealers were not unlawful if they were undisclosed to the customer. This verdict, delivered on August 1, 2025, resulted in millions of drivers being denied compensation for mis-sold car loans, leaving only the most severe cases eligible for redress. With a projected potential cost of up to £18 billion, the FCA has signaled its intent to investigate how consumers may be compensated for their financial losses. This sweeping decision affects numerous banking institutions, as they will be required to reimburse consumers under the reviewed compensation scheme. The FCA’s move comes amid rising concerns over consumer protection and financial transparency in the lending market. Furthermore, the financial markets reacted significantly to the Supreme Court ruling. Following the announcement, shares for lenders like Lloyds surged by 6%, while FTSE 250 firm Close Brothers saw an increase of over 20%. The immediate uptick in share prices reflects the market's reaction to the lower-than-expected compensation estimates, indicating that investors believe the financial impact on these institutions might not be as severe as initially feared. On the same day, the FTSE 100 index experienced a slight rise, indicating an overall market recovery after a sharp decline attributed to the upcoming tariffs announced by former President Donald Trump. Economic analysts will be closely watching this situation develop, particularly as the Bank of England's Monetary Policy Committee is scheduled to make a decision regarding interest rates, which are anticipated to drop to 4% amid rising unemployment in the country. The intersection of these events paints a complex picture of the current business landscape in the UK, where financial institutions, regulators, and consumers are all navigating the aftermath of recent judicial and market developments.