Supreme Court judges have rejected Chancellor Rachel Reeves' request that they go easy on the lenders that provided controversial motor finance loans.
The judges are set to convene for a hearing in April in a final case brought by two of the lenders after the Court of Appeal ruled that the commissions paid to a dealer without a customer's consent were unlawful.
Following pressure from lenders, who are claiming that a compensation bill in the tens of billions could disrupt the vehicle finance market, Reeves applied to make an intervention in the forthcoming court case.
Her Treasury department was said to be keen to ensure that "any redress is proportionate to the loss actually suffered and to avoid conferring a windfall", arguing that this could "cause considerable economic harm", as most cars in the UK are bought using loans.
Shares in lenders, including Close Brothers Group PLC (LSE:CBG), one of the pair bringing the Supreme Court case, have been dragged down by worries about the size of the potential compensation, with some analysts forecasting it could top £40 billion.
Shares in Close Bros and another of the listed lenders, Lloyds Banking Group PLC (LSE:LLOY), fell over 8% and 3% on Monday afternoon, with Close continuing to fall on Tuesday morning.