Shares in Lloyds Banking Group and Close Brothers slid further on Monday after a landmark London court ruling that could expose motor finance providers to billions of pounds in extra compensation.

On Friday, the Court of Appeal resoundingly sided with consumers and ruled it unlawful for car dealers to get a commission from lenders “without obtaining the customer’s fully informed consent to the payment”.

The test case is set to influence the Financial Conduct Authority’s (FCA) decision on whether to implement a punitive redress scheme as part of its probe into the so-called discretionary commission agreements (DCAs).

The ruling sent shares in some of the most exposed banks down sharply on Friday and further today as investors digested the decision.

Lloyds’ stock price dropped as much as 2.9 per cent this morning, making the worst performer on the blue-chip FTSE 100 index. It previously closed two per cent down on Friday.

Meanwhile, Close Brothers was the biggest faller on the mid-cap FTSE 250 after plunging as much as 10 per cent. The stock has been in freefall since Friday, when it cratered a record 25 per cent.

Shares in Close Brothers, one of the banks involved in the test case, are currently trading at their lowest level in almost three decades.

Close Brothers is considered the most exposed lender to the FCA’s review in relative terms and said the precedent set by the ruling could result in “significant liabilities”.

The 146-year-old merchant bank has paused selling new car loans in light of the judgment and intends to appeal to the UK’s Supreme Court.

The FCA announced in January that it would review whether customers were unfairly charged high interest rates between 2007 and 2021, when DCAs were banned.

“The judgement handed down on Friday has significantly increased the potential impact of this issue for banks,” Benjamin Toms, an analyst at RBC Capital Markets, told City AM.

“A broad interpretation of Friday’s ruling means that we now could be talking about any commission in any finance arrangement where the customer has not expressly consented to the broker receiving a defined quantum of kickback.”