Santander UK reports major profit decline as it puts aside £295m for car finance issues. The banks quarterly earnings dropped to £143m from £413m (a big-time fall of 65 percent) ending sept-30
The bank-giant had to delay its results because of a game-changing Court ruling that opened up more ways for car-buyers to claim money back. The set-aside cash includes stuff for legal costs and possible paybacks but theres no final number yet - it could go way up or down
The car-finance world got shook-up when regulators started looking into dealer-commission practices. Back in early-24‚ the Financial Conduct Authority began checking deals from way back in 07. They banned dealer-bonus payments about 3 years ago because of sketchy interest-rate practices
Hereʼs what happened in the car-buying world:
- Nine of ten new cars were bought with loans
- Dealers got secret bonuses for higher interest rates
- Customers didnt know about these hidden payments
- Banks might have to pay-back billions
Other banks are feeling the heat too - Lloyds Bank already put £450m aside and Close Brothers had to stop paying dividends. The whole thing might cost banks up to £30bn according to Moodys rating folks
The drama isnt over yet: theres a big competition law case against Santander (paused til summer-25) while the main investigation keeps going til next spring. Meanwhile all car-finance complaints are on hold til regulators finish their work