Lloyds Banking Group has announced an allocation of an additional £800 million to address car finance compensation claims, which now totals nearly £2 billion. The decision follows an assessment indicating that the number of eligible claims is anticipated to exceed earlier estimates.
Millions of drivers who financed vehicle purchases with undisclosed commission payments between 2007 and 2024 may qualify for compensation. The Financial Conduct Authority (FCA) recently detailed a proposed compensation scheme, revealing that around 14 million unfair contracts could result in payouts averaging approximately £700 each. This could ultimately lead to a total compensation payout of up to £8.2 billion from lenders.
The compensation relates to commission arrangements between lenders and dealers, unfair contracts, and misleading information provided to consumers. Lloyds stated that the new provision for redress stemmed from an increased likelihood of a higher volume of historical cases being eligible for compensation. The bank’s best estimate for the total cost of redress currently stands at £1.95 billion.
The proposed scheme is designed to be free for consumers; however, the interest on compensation payments is expected to be lower than what was offered in the previous payment protection insurance (PPI) scandal, which cost Lloyds £22 billion.
The FCA estimates that 44% of motor finance agreements made since 2007 may qualify for compensation, though a Supreme Court ruling in August may have limited the scope of such cases. The FCA advises consumers wishing to file complaints to contact their lenders or brokers, providing guidance on how to proceed. Meanwhile, the Finance and Leasing Association has expressed concerns that the FCA may be inclined to overcompensate in this situation.
Source: https://www.bbc.com/news/articles/cq6zr733917o?at_medium=RSS&at_campaign=rss