The UK’s highest court on Tuesday opens a hearing to determine whether controversial car loans were unlawful, in a case that could cost banks billions of pounds in compensation.

Lenders are appealing a landmark ruling by a Court of Appeal in November that deemed it unlawful for car dealers to receive a commission on loans without sufficiently informing borrowers.

It is estimated that millions of drivers would be eligible for compensation should the Supreme Court side with borrowers in the three-day hearing.

The loans, which were around for 14 years from 2007, incentivised car dealers to give higher interest rates in return for a higher commission.

Britain’s financial watchdog has made the commissions illegal.

The Supreme Court will consider two cases against South African lender FirstRand bank and one against British bank Close Brothers.

In preparation for the ruling, British banks have set aside considerable sums, including Lloyds Bank, which has earmarked nearly £1.2 billion ($1.6 billion).

Consumer group Which! estimated it could cost banks up to £16 billion, while other analysts expect the sums to be higher, with those at HSBC suggesting it could hit £44 billion.

The highest figures could put it on the same scale as the fallout from payment protection insurance (PPI), one of Britain’s most costly consumer scandals, according to analysts.

Amid concerns over the economic fallout, the UK government made an unsuccessful attempt to intervene in the case earlier this year.

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Analysts said that the government may be concerned about the impact on banks’ willingness to provide credit at a time when the economic outlook remains uncertain.

While the hearing is due to conclude on Thursday, a judgment is not expected until the summer.

The Financial Conduct Authority, which banned undisclosed commissions in 2021, plans to wait for the judgment before deciding whether to start a programme for automatic compensation.