Lloyds Banking Group has been forced to allocate a staggering £450 million in provisions following an ongoing investigation by the Financial Conduct Authority (FCA) into controversial car finance commission practices. The move has sent shockwaves through the financial sector, with Lloyds' shares plummeting by nearly 2% in early trading.
What’s Behind the Scandal?
The FCA is scrutinising historical commission arrangements in the motor finance industry, where lenders allegedly incentivised brokers to charge customers higher interest rates. Lloyds, which owns Black Horse, one of the UK’s largest car finance providers, is among several banks under the microscope.
Market Reaction
Investors reacted swiftly, with Lloyds' share price dropping to 41.2p—its lowest level in months. Analysts warn that the final financial impact could be even greater, depending on the FCA’s findings.
Broader Implications
This scandal echoes past mis-selling controversies, such as PPI, and raises fresh concerns about transparency in consumer lending. Other major lenders, including Close Brothers, have also set aside funds, signalling potential industry-wide repercussions.
Lloyds has stated it will cooperate fully with regulators, but the fallout may extend well beyond financial penalties, damaging consumer trust in the sector.
