Lloyds Banking Group is facing a court battle with 30,000 car loan customers who are abandoning the Financial Conduct Authority's (FCA) redress scheme. The claims law firm Courmacs Legal plans to file a £66m omnibus claim on behalf of borrowers harmed by loan contracts from Lloyds' motor finance arm, Black Horse.
The customers fear the FCA's scheme will shortchange them, with average payouts of £700 per claim compared to the £1,500 average that consumer groups say is due. The FCA's final details are due on Monday, but consumers are pre-emptively waiving their rights to the scheme.
Darren Smith, managing director of Courmacs Legal, said the proposed redress scheme "looks like it will let lenders off the hook" due to bank lobbying. He stated they had no choice but to act in clients' best interests. The firm takes a 28% cut of any potential payout.
The case is backed by litigation funders and is expected to be the first of several omnibus suits against other lenders. However, a court of appeal case brought by Lloyds and other banks seeks to block group legal actions over the scandal, with a hearing in April.
An FCA spokesperson argued that a redress scheme would be free to use and provide fair compensation more quickly, warning that legal representatives need to weigh what is in clients' interests and that fees could take up to 30% of payouts.
