As pressure mounts on the UK motor finance industry, Santander is exploring a significant shake-up—one that could see its car finance division split off from the rest of its United Kingdom operations.
The move comes in the wake of a £30 billion compensation crisis that’s rapidly reshaping the motor finance sector. With thousands of consumers claiming they were mis-sold car loans through hidden commission deals, lenders like Santander are scrambling to protect themselves from the financial fallout.
Why the Split?
According to reports from The Guardian, Santander is looking at hiving off its Redhill-based consumer finance arm, which handles its UK car finance agreements.
This would effectively ringfence the liabilities of its vehicle finance division, separating them from its wider UK banking operations.
It’s not hard to see why. Analysts estimate Santander could be facing as much as £1.9 billion in compensation claims.
That figure is based on predictions about the potential outcome of an upcoming Supreme Court ruling, which could make it easier for consumers to win redress for undisclosed commission arrangements.
If the court sides with consumers, every major car finance lender in the UK, including Santander, could be forced to pay out billions.
Background: What’s the Scandal?
Between 2007 and 2021, many car finance deals included discretionary commission arrangements (DCAs).
These allowed dealers to set interest rates—and increase them—without telling the customer they were earning more commission as a result. The Financial Conduct Authority (FCA) banned these practices in 2021, but a wave of legal action has since revealed just how widespread the issue was.
What Santander Has Said (and What It Hasn’t)
While Santander hasn’t confirmed the restructuring, the fact that it’s being considered signals just how seriously the bank is taking the potential hit. A spokesperson declined to comment on the speculation, but the bank has already set aside £295 million in provisions, a number that may rise.
The proposed split would need approval from regulators and could involve moving the car finance business out of Santander UK entirely, possibly into a separate legal entity.
What This Means for Consumers
If you took out a PCP or HP agreement with Santander between 2007 and 2021, especially if arranged through a car dealership, it’s worth checking your paperwork. If you were never told about commission payments to the dealer, you could be due compensation.
And while Santander looks to restructure its business behind the scenes, consumers still have until December 2025 to lodge complaints, thanks to FCA intervention.
Final Thoughts
Santander’s potential split marks a turning point in the car finance saga. As the financial and reputational risks become too big to ignore, we’re likely to see more lenders follow suit, with some separating operations and others ramping up provisions.
One thing’s certain: this story isn’t going away anytime soon. If you’ve ever financed a car in the UK, it’s time to take a second look at the fine print—you might be owed more than you think. Use our quick and simple eligibility tool to see if you’ve been potentially mis-sold.
