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Lloyds Banking Group has decided to set aside an additional £800m for car finance compensation claims. This brings the total amount allocated by the bank for redress to nearly £2bn. The company stated that the number of eligible claims is expected to be higher than previously anticipated. Millions of drivers who purchased cars on finance with hidden commission payments between 2007 and 2024 may be eligible for redress. The Financial Conduct Authority (FCA) recently published details of its proposed compensation scheme.
According to the FCA, payouts could be due on approximately 14 million unfair deals, with an average of around £700 each. This could result in lenders paying out a total of £8.2bn in compensation. The payouts are related to commission arrangements between lenders and dealers, unfair contracts, and inaccurate information provided to car buyers. Lloyds mentioned in a statement that, based on the FCA proposals, the potential impact is towards the adverse end of the range of previous expected outcomes. The bank decided to set aside an additional £800m for redress due to the increased likelihood of a higher number of historical cases being eligible for redress. Their “best estimate” of the total cost of redress is £1.95bn.
The proposed scheme would be accessible for consumers at no cost. However, the interest they receive on redress will be significantly lower than that paid following the payment protection insurance (PPI) scandal, which cost Lloyds £22bn. The FCA estimates that 44% of all motor finance agreements made since 2007 will be eligible for payouts. Though, a ruling at the Supreme Court in August limited the scope of these cases. For anyone looking to make a complaint, the FCA advises them to reach out to their lender or broker. The Finance and Leasing Association, the body representing the lending industry, has expressed concerns that the FCA is “overcompensating.
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