Lloyds Banking Group Allocates £1.2 Billion to Address Car Loan Mis-Selling Fallout

Lloyds Banking Group has significantly increased its financial reserves to address the car loan mis-selling scandal, raising the total amount set aside to £1.2 billion. This decision comes as the bank adds an additional £700 million to the £450 million previously allocated for potential compensation payments to affected customers. The main issue stems from inadequate transparency concerning commission payments to car dealers in the car finance sector. Group CEO Charlie Nunn stated that despite this financial provisioning affecting profits, the overall performance of Lloyds remains strong, reporting a pre-tax profit of £5.97 billion for the year, down from £7.5 billion a year earlier due to a faltering UK economy and declining interest rates.

The upcoming ruling by the Supreme Court in April will determine whether customers were sufficiently informed about commission structures when obtaining car loans, which could lead to substantial compensation payouts. Each year, approximately two million vehicles are financed, which may expose banks to liability for mis-sold agreements, primarily prior to regulatory changes implemented in 2021. Matt Britzman, an analyst, indicated that while Lloyds could be deemed overly cautious in its provisions, the bank holds substantial exposure compared to its competitors. Concurrently, other banks including Barclays and Santander have made their own provisions, albeit significantly lower than Lloyds’. The article draws parallels to the previous PPI mis-selling scandal that cost Lloyds £21.9 billion in compensations, underlining the risk involved with financial mis-selling in the banking industry.