Lloyds Banking Group is facing a £66m court battle with 30,000 car loan customers who are opting out of the Financial Conduct Authority's (FCA) official redress scheme. The claims law firm Courmacs Legal is preparing an omnibus claim on behalf of borrowers who believe they were financially harmed by car loan contracts from Lloyds' motor finance arm, Black Horse.
The case is part of a wider car loans commission scandal, where drivers were overcharged due to unfair commission arrangements between lenders and car dealers. Consumers are abandoning the FCA's estimated £11bn compensation scheme, fearing it will shortchange them and favour lenders. Draft details suggest average payouts of £700 per claim, less than half the £1,500 that the all-party parliamentary group on fair banking says consumers should receive.
Darren Smith, managing director of Courmacs Legal, said: 'The FCA's proposed redress scheme looks like it will let lenders off the hook because the banks have lobbied to minimise payouts to victims. If the regulator had put consumers first, the decision to use the courts would not be this attractive.' The firm is taking a 28% cut of any potential payout.
The omnibus claim, expected to be filed in the coming weeks, is backed by litigation funders and is likely the first of several 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 due in April. An FCA spokesperson said the redress scheme would be free to use and provide fair compensation more quickly, without losing up to 30% in fees.
