8:52 am, February 22, 2024
Lloyds Banking Group is said to have put aside a whopping £450m as it prepares to pay for the ongoing motor finance scandal.
Car Dealer reported last month that the Financial Conduct Authority (FCA) is investigating cases of finance houses not paying out compensation to customers over now-banned ‘discretionary commission arrangements’.
The watchdog is using its powers under S166 of the Financial Services and Markets Act 2000 to identify cases of potential wrongdoing by motor finance firms.
Since then, consumer champion Martin Lewis has set up a free reclaim tool and guide, which has been flooded with enquiries.
Experts are now expecting the crisis to be Britain’s second biggest reclaim scandal after PPI, with Lloyds set to be among the hardest hit.
Now, the firm is looking to take action and has ring fenced an eye-watering nine figure sum to deal with claims.
The Times has been studying the bank’s latest set of accounts, which show that the group exceeded expectations to make a pre-tax profit of £7.5bn.
However, it is what the figures said about the motor finance crisis which has caught the eye.
Bosses have put aside a £450m for ‘remediation’ or compensation in order to cover potential operational and admin costs, which are expected as a result of the FCA’s investigation.
They also expressed a belief that far fewer people will have been impacted by the scandal than in the case of PPI and pointed to ‘key differences’ between the two cases.
The bank said: ‘There remains significant uncertainty on the extent (if any) of any remediation action, and we believe we complied with regulation at the time, so we welcome the FCA review to provide clarity.’
The motor finance scandal so far…
- FCA to investigate car finance for not paying out compensation to customers
- Banks that lent money via motor finance could face total bill of £10bn as FCA investigates
- Motor Connect director fears FCA investigation into motor finance could be ‘next big PPI scandal’
- Car dealers to be ‘inundated’ with compensation claims after Martin Lewis show on motor finance
- Martin Lewis’s car finance complaint tool receives 262,500 inquiries in opening days
Car Dealer reported on January 18 that banks that lent money via motor finance could face total bill of £10bn.
On a recent episode of the Car Dealer Podcast, Motor Connect director Steve Corwood warned that the investigation could be the ‘next big PPI scandal’.
Sheldon Mills, executive director of consumers and competition at the FCA, said last month: ‘We are taking a closer look at historical discretionary commission arrangements in the motor finance market following a high number of complaints from customers, which are being rejected by firms.
‘If we find widespread misconduct, we will act to make sure people are compensated in an orderly, consistent and efficient way.’
Aside from Lloyds, which owns Black Horse, the likes of Barclays and Santander are also likely to be heavily affected.
