Lloyds Banking Group has announced it is putting aside an additional £700 million for potential car finance compensation payments.
The money, which will knock the famous bank’s profits for the year, brings the total amount of money allocated by Lloyds for the vehicle finance scandal to an eye-watering £1.2 billion – more than any other bank operating in the UK.
Lloyds Banking Group owns Black Horse Motor Finance, which was reported to have broken the law for giving commission to dealers without customers being made aware by a court in October 2024.
Drivers who made a claim against the finance company are currently awaiting a decision over how much compensation they will receive.
Charlie Nunn, Chief Executive of Lloyds Banking Group, noted that the earmarked figure is the company’s “best guess” at estimating how much money will be given back to drivers.
Sometimes referred to as ‘PPI 2.0’, the car finance scandal has seen a number of legal firms and drivers alike accuse financers of profiteering from hidden commission payments on new and used models.
Whilst the process was banned by the Financial Conduct Authority (FCA) in 2021, many legal firms previously called on drivers who financed a vehicle as long ago as 2007 to help back cases against some of the biggest firms in the country.
The Court of Appeal has since ruled that lenders acted unlawfully by paying a commission to dealers without the customer’s knowledge, with some estimating that drivers could receive a combined payout of up to £44 billion.
Whilst the ruling is welcome news to motorists who financed a car between 2007 and 2021, Chancellor Rachel Reeves has previously opposed the scandal, warning that it will make it harder for motorists to get behind the wheel of a new car.
She explained: “There is nothing pro-consumer about making it harder for people to buy an affordable car for their family. That would be bad for working families.”
The Chancellor attempted to intervene in the case, which is due to take place in April 2025, but was blocked by the Supreme Court.
