Lloyds bank faces £66m court battle with car loan customers | Lloyds Banking Group
Lloyds Banking Group is facing a court battle with 30,000 aggrieved car loan customers who will opt out of the Council regulator’s official compensation scheme for fear it will shortchange consumers and favor lenders.
Claims law firm Courmacs Legal is planning to bring a blanket claim of £66 million on behalf of debtors who believe they have been financially harmed by vehicle loan agreements set up by Lloyds’ motor finance arm Black Horse.
The complaints are part of a much larger auto loan brokerage scandal in which drivers are overcharged for their loans because of unfair commission arrangements between lenders and auto dealers.
But the omnibus lawsuit, which is expected to be filed in the coming weeks, means consumers have decided to pre-emptively waive their rights to the Financial Conduct Authority’s (FCA) estimated £11bn compensation scheme, even before final details are announced on Monday. This is despite law firms such as Courmacs taking a 28% cut of potential payouts.
The news comes as compensation law firms and consumer groups claim debtors will be shortchanged because of the FCA plan, based on draft details submitted for consultation in the final months of 2025.
Under the FCA’s proposals, consumers will receive an average of £700 per claim; This is less than half the average payment of £1,500 that groups such as the all-party parliamentary group on fair banking say consumers should pay.
Debt law firms, which have a stake in every successful case, argued that the scheme favored big banks and specialist lenders lobbying regulators and the government, warning that huge compensation payments could force some providers to withdraw loans or even go into bankruptcy.
The lenders’ warnings led to controversial interventions, with chancellor Rachel Reeves warning judges against making large payments to consumers. Last summer, he even considered overturning the high court’s decision if consumers sided with it.
“The FCA’s proposed redress scheme looks set to let lenders off the hook because banks have lobbied to minimize payouts to victims,” said Darren Smith, managing director of Courmacs Legal. “If the regulator had put consumers first, the decision to take to the courts would not have been so attractive. We had no choice but to act in the best interests of our customers and we will continue to do so.”
The case, backed by litigation funders, is expected to be the first in a series of omnibus lawsuits against other lenders in connection with the car finance dodging scandal. A source close to Courmacs said similar omnibus actions would be taken against other major car finance lenders later this year.
But an appeals court case brought by Lloyds and other banks aims to block class actions over the car finance scandal. This could make it difficult for Courmacs’ multifaceted claims to move forward, but the firm said it does not expect delays in its own actions. The case in the appeals court is expected to be heard in April.
A spokesman for the FCA said: “A compensation scheme would be free to use, meaning consumers receive fair compensation more quickly and do not lose 30% of it in fees. Legal representatives need to weigh carefully what is in their clients’ best interests.”
Lloyds declined to comment.
