Lloyds warns car finance compensation could cost it nearly £2bn due to historic cases
Warning the true cost of car finance compensation could be billions
- Lloyds Banking Group has set aside an additional £800 million for the car finance compensation scheme, bringing its total reserves for the issue to £1.95 billion.
- The banking giant estimates its potential liability for the scheme could reach nearly £2 billion.
- Lloyds plans to challenge the Financial Conduct Authority (FCA)'s proposed scheme, arguing that its calculations overestimate the compensation customers are owed and do not reflect actual loss.
- The FCA's scheme addresses Discretionary Commission Arrangements (DCAs), where brokers increased interest rates on car loans for higher commission, potentially affecting 14 million deals.
- Lloyds believes the FCA's proposed redress methodology could lead to customers receiving more than 100 per cent of the commission back and intends to make representations to the FCA.