Lloyds warns car finance scandal could cost it £2bn
Lloyds Banking Group is setting aside an additional £800 million for vehicle finance claims, bringing the bank’s total allocation for compensation to around £2 billion.
The number of eligible claims is expected to be higher than previously thought, the company said.
Millions of drivers who bought cars with hidden commission payments through financing between 2007 and 2024 may be eligible for compensation.
The Financial Conduct Authority (FCA) has published details of the proposed compensation scheme last week.
The FCA said the payments could be made due to around 14 million unfair settlements, which would average around £700 each.
This could result in lenders paying compensation totaling £8.2bn.
The charges stem from commission arrangements between lenders and dealers, unfair contracts and inaccurate information given to car buyers.
Lloyds said in a statement: “Under the FCA proposals in their current form, the potential impact is at the negative end of the results previously expected.”
It said it had set aside an additional £800 million for compensation because of the “increased likelihood that a greater number of historical cases will be eligible for compensation”.
It was stated that the “best estimate” of the total compensation cost was £1.95 billion.
The proposed program will be free for consumers to access, but the interest they will receive on the compensation will be much lower than the interest paid after the compensation. payment protection insurance (PPI) scandal.
This scandal cost Lloyds £22 billion.
The FCA estimates that 44% of all motor finance deals made since 2007 will qualify for payment.
However, a Supreme Court decision in August limited the scope of these cases.
The FCA advises anyone wishing to make a complaint to contact their lender or broker and should be aware of this. guidance on how to make a complaint.
But the Finance and Leasing Association, the body that represents the lending industry, said the FCA had “overcompensated”.
