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Banks (Finance)

Lloyds Launches Fightback Against FCA Over PS2bn Car Loan Compensation Plan

Strategic Insights

— 2 min read

Lloyds Banking Group has launched a scathing attack on the Financial Conduct Authority (FCA) over its proposed compensation plan for motorists mis-sold car loans, accusing the regulator of botching the design of the scheme. The plan, which could see up to 14.2 million motorists receive payouts of around £700 each, has been criticized by the lender and other industry bodies as not reflecting the actual loss to customers. Lloyds has set aside £1.95 billion for the scandal, which it believes has been exacerbated by the FCA's design of the scheme. The lender has hinted that it could yet take legal action if the plans are not watered down.

Key Takeaways:

  • Lloyds has accused the FCA of botching the design of the compensation plan, which could see up to 14.2 million motorists receive payouts of around £700 each.
  • The plan, which relates to motor finance agreements made between 2007 and 2024, centres on the practice of commissions being paid to car dealers for selling loans to customers on behalf of banks without telling the customers about it.
  • Lloyds has set aside £1.95 billion for the scandal, which it believes has been exacerbated by the FCA's design of the scheme.
  • The lender has hinted that it could yet take legal action if the plans are not watered down.
  • The scheme has been criticized by industry bodies, including the Finance and Leasing Association, which has said that the proposed scheme is "so broad that it would compensate customers who suffered no loss".
  • Car-maker BMW is seeking talks with the Chancellor over the issue, and is reportedly facing a potential hit of over £200m from the scandal.
  • FirstRand, the South African owner of British motor finance business MotoNovo, has also warned against the watchdog's plan, saying that it goes beyond "what can be considered proportionate or reasonable".

Statistics:

  • 14.2 million motor finance agreements made between 2007 and 2024 are entitled to compensation.
  • £1.95 billion has been set aside by Lloyds for the scandal.
  • £700 is the average payout expected for each of the 14.2 million motorists.
  • £11 billion is the estimated cost to the banking industry for the scandal.
  • 44% of car finance agreements made over the 17-year period were entitled to compensation.
  • The FCA has found that some lenders broke the law in relation to motor finance agreements.

Sources:

  • The Daily Mail, byline: John-Paul Ford Rojas, "Lloyds launches fightback against City watchdog over £2bn car loan compensation plan"
  • The Times, "BMW seeks talks with Chancellor over £200m motor finance scandal"

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