Metro Bank pauses asset finance lending after car loan ruling

The fallout from the car loans scandal has widened after it emerged that Metro Bank had temporarily halted its asset finance lending to review the ramifications of a shock court ruling.
Several lenders have frozen their motor finance operations in recent days, causing chaos in the car loans market, following a Court of Appeal judgment last Friday that set a much higher bar for the disclosure of commission arrangements between credit brokers and lenders than had been required by existing regulations. Lenders were found to be liable for brokers’ lack of transparency.
Metro told The Times that it had “temporarily paused any asset finance lending whilst we reviewed our current systems, process and legal documentation. This process is nearly complete and we anticipate lending will recommence very shortly.”
The bank added that it had “now introduced a new commission consent form which brokers need to ensure is completed by the person taking out the finance”.
The decision by Metro shows the uncertainty caused by the ruling is spreading beyond the car loans industry to other types of lending, intensifying the disruption.
Asset finance is a form of lending that helps companies buy anything from printing equipment and production machinery to construction vehicles.
The Finance & Leasing Association warned last week that the implications of the court ruling “stretch far beyond the motor finance sector”. Analysts at RBC Capital Markets, a stockbroker, had also cautioned that the judgment potentially “also encompasses other types of lending where there is a discretionary commission payment”.
The Financial Conduct Authority rattled the car loans industry in January when it opened an inquiry into motor finance. This wide-ranging review is looking at deals struck between April 2007 and January 2021, when it banned discretionary commission arrangements on motor finance, and fuelled speculation the watchdog will force lenders to pay billions of pounds in compensation to consumers. Analysts have now increased their estimates for the size of the potential redress bill following the court ruling.
FirstRand and Close Brothers, which are the lenders at the centre of last week’s judgment, intend to appeal to the Supreme Court.