Lloyds Banking Group has maintained its provision for motor finance compensation at nearly £2bn, after setting aside an additional £800m. The bank, one of the most exposed to the scandal involving overcharged car loans due to dealer commissions, had previously allocated £1.15bn for potential costs.
The increased provision reflects a higher likelihood of historical cases, particularly those involving discretionary commission arrangements, being eligible for compensation. This follows the Financial Conduct Authority's publication of a 360-page consultation paper outlining a redress scheme, which estimates total industry costs at £11bn, potentially rising to £12.4bn if all eligible victims claim.
Lloyds stated that the ultimate outcome may evolve based on representations from parties, legal proceedings, and the Supreme Court judgment. However, the £1.95bn provision, covering redress and operational costs, represents the group's best estimate of the impact.
Other lenders are also setting aside funds: Hyundai Capital UK has provisioned £34.5m, Honda Finance Europe £62.2m, and BMW's financial arm £200m. Santander UK, Barclays, and Close Brothers are expected to shoulder most of the costs, with banks accounting for 51% of payouts, captive lenders 47%, and independent lenders 2%.
