Lloyds Increases Provision for Mis-Sold Car Finance Compensation
The motor finance mis-selling scandal continues to escalate, with Lloyds Banking, mis-sold car loans increasing its compensation provision to GBP 1.1 billion following a significant Court of Appeal ruling. As the owner of Black Horse mis-sold car claims, the UK’s largest car finance provider, Lloyds faces major exposure to mis-selling claims.
The additional GBP 700 million set aside by Lloyds highlights the growing financial impact of the Financial Conduct Authority (FCA) review into car loans issued under discretionary commission arrangements (DCA)—a practice that allowed dealers to increase interest rates for higher commission payouts, often without informing customers.
Court Rulings and Regulatory Scrutiny
The mis-selling scandal intensified in October 2023, when the Court of Appeal ruled in favour of consumers in cases against Close Brothers and MotoNovo Finance. The ruling expanded the scope of compensation claims by determining that undisclosed commissions were unlawful, even if the borrower had not directly challenged the fairness of the agreement.
Key developments include:
• January 2023 – The FCA launched an investigation into the car finance market, focusing on historical discretionary commission agreements.
• October 2023 – The Court of Appeal ruling against Close Brothers and MotoNovo Finance significantly widened the scope for claims.
• February 2024 – Lloyds increased its mis-selling provision by GBP 700 million, taking the total to GBP 1.15 billion—the highest of any UK lender.
• April 2024 – Close Brothers and MotoNovo Finance are set to appeal to the Supreme Court in a case that could have further implications for the industry.
Industry-Wide Impact on Car Finance Lenders
Lloyds, through Black Horse, is particularly exposed due to its dominance in the car finance market. Analysts predict that the total cost to lenders across the UK could run into tens of billions of pounds, with more consumers now realising they may have been overcharged.
City executives have raised concerns about the retrospective nature of the FCA’s investigation, which examines deals dating back as far as April 2007. The regulator banned discretionary commissions in January 2021, but many agreements signed before this ban are now under scrutiny.
Lloyds’ chief financial officer, William Chalmers, has warned of “lots of uncertainties” surrounding its motor finance liability. Some analysts believe Lloyds’ total exposure could exceed GBP 4 billion once all claims are assessed.
Further Reading on mis-sold car loans with Lloyds and Blackhorse Lenders
1. Lloyds Mis-Sold Car Finance: This page provides detailed information on how to claim against Lloyds Bank and its subsidiary, Black Horse Finance, for mis-sold car loans.
2. Mis-Sold Car Finance Claims: Learn about the process of identifying and claiming compensation for mis-sold car finance agreements, including those involving hidden fees and inflated interest rates.
3. Mis-Sold Car Loans Worries Bank of England: This article discusses the broader implications of the car finance mis-selling scandal, highlighting concerns raised by the Bank of England.
Government and Supreme Court Involvement
The UK government attempted to intervene in the Supreme Court appeal, citing concerns that the Court of Appeal judgment could damage the regulatory environment in Britain. However, the Supreme Court rejected the Treasury’s application, meaning the case will proceed without government involvement.
Lloyds’ CEO, Charlie Nunn, has also voiced concerns over the wider impact of the ruling, stating that investors may lose confidence in the UK financial sector due to what he called “regulatory unpredictability.”
Despite the uncertainty, Lloyds reassured investors by maintaining its long-term profit targets. The bank also announced a GBP 1.7 billion share buyback programme and a GBP 1.28 billion dividend payout, signalling confidence in its ability to absorb potential financial hits from the scandal.
What Happens Next on Blackhorse and Lloyds Mis-Sold Car Loans
With the Supreme Court appeal set for April 2025, the future of the car finance mis-selling scandal remains uncertain. If the Court upholds the October 2023 ruling, the industry could face even greater compensation liabilities.
For consumers who believe they may have been mis-sold a Black Horse car loan, expert legal guidance is available.
