The Supreme Court of the United Kingdom is set to review a ruling that could have significant financial implications for Britain's financial sector on Tuesday. The judgment stated that it was unlawful for lenders to pay commissions to car dealers without the informed consent of customers, leading to concerns about potential compensation costs.

Major financial institutions like Lloyds Banking Group, Close Brothers, and Santander UK have allocated over 1.5 billion pounds for possible compensation claims. Analysts believe that this situation could result in substantial costs for banks comparable to the expenses incurred during the payment protection insurance mis-selling scandal.

The Supreme Court will analyze three previous cases involving FirstRand and Close Brothers to determine car dealers' legal obligations in providing information to customers when serving as credit brokers. The court will also deliberate on whether lenders inadequately disclosed commissions to dealers and their liability for the brokers' actions.

If lenders are found responsible, and the interaction with customers is considered unfair under the Consumer Credit Act, the court will decide on the necessary remedies. The Financial Conduct Authority has already prohibited discretionary motor finance commissions to prevent customer exploitation.

The FCA may establish a compensation scheme if the Supreme Court determines that lenders and brokers were not transparent in disclosing commissions. Over 2 million individuals rely on motor finance annually in the UK, and only a few major lenders have significant exposure to the potential repercussions of the judgment.