Santander Eyes UK Restructuring Amid Car Finance Crackdown
With the car finance scandal growing, one of the largest lenders, Santander, is considering restructuring its UK operations.
Santander is reportedly considering a major overhaul of its UK operations, as mounting scrutiny over mis-sold car finance deals forces lenders to rethink their strategies.
The Spanish banking group, one of the United Kingdom’s largest loan providers, is said to be exploring a plan to separate its car finance division from the rest of its British business.
£1.9 Billion in Potential Compensation
At the centre of this proposed restructuring is the growing likelihood that Santander will have to compensate motorists who took out Personal Contract Purchase (PCP) or Hire Purchase (HP) agreements. Many of these deals were sold using discretionary commission models, where car dealers could set the interest rate on loans, often inflating it without telling the customer.
The higher the rate, the bigger the dealer’s commission, creating a conflict of interest that left consumers overpaying without knowing how their deals were structured.
A landmark ruling by the Court of Appeal in early 2024 declared these practices unlawful, paving the way for a surge in PCP compensation claims. Analysts estimate Santander might be liable for up to £1.9 billion, while total industry costs could soar to £50 billion, depending on the outcome of a forthcoming Supreme Court decision.
Profits Slump as Santander Sets Aside Funds
In anticipation, Santander UK has already put aside £295 million for potential payouts and reported a 38% drop in profits for 2024. The United Kingdom has emerged as one of the bank’s weakest-performing regions. In response, the company plans to cut 1,400 jobs and is exploring further automation and cost-cutting measures.
Car Finance Arm Could Be Spun Off
According to Bloomberg, Santander is considering divesting its consumer finance arm, which includes the UK car loan business, from the main UK operation. The proposed restructuring would require approval from financial regulators. The bank declined to comment.
The motor finance business, currently based in Redhill, Surrey, may become a standalone entity. Some analysts believe this could help isolate risk and make Santander UK more attractive to potential buyers.
Rumours of a possible sale of Santander UK surfaced in January. However, senior figures in the financial sector say a deal is unlikely until the final cost of the commission scandal becomes clear.
What Does This Mean for Customers?
While no immediate changes will affect existing agreements, the restructuring sends a strong signal: Santander is preparing for a major compensation wave. Separating its car finance arm suggests the bank is attempting to contain financial risk, reinforcing the growing expectation that redress is not only likely but imminent.
If you took out a PCP or HP deal involving a discretionary commission, this move should encourage you to act. It shows Santander is preparing for large-scale claims and strengthens the case for consumers to come forward, especially with a final Supreme Court ruling on the horizon.
Now Is the Time to Act
In short: if you believe you were mis-sold car finance, don’t wait. The tide is turning in favour of consumers.
