Lloyds Banking Group has set aside an additional £800 million to cover potential compensation claims related to the car finance mis-selling scandal, as the UK’s financial regulator finalises plans for a sweeping redress scheme.
The FTSE 100 lender said the provision “reflects the increased likelihood of a higher number of historical cases being eligible for redress” and a “higher level of redress than anticipated” under previous assumptions.
The move follows last week’s update from the Financial Conduct Authority (FCA), which detailed how it plans to compensate drivers over historic commission arrangements between car dealers and lenders. The regulator estimates that the total cost of redress across the industry could reach £11 billion, making it one of the largest compensation schemes since the PPI scandal.
With the latest charge, Lloyds has now earmarked £1.95 billion in total to address potential claims. The group — one of the UK’s biggest car finance providers through its Black Horse brand — has been among the most exposed to the FCA investigation, which centres on discretionary commission models that may have incentivised brokers to increase interest rates for borrowers.
The watchdog is expected to publish its final decision on compensation later this year, after reviewing feedback from lenders and consumer groups. Analysts have warned that the scandal could weigh on bank earnings into 2026, with other major lenders including Barclays and Santander UK also expected to make additional provisions.
Lloyds said it continues to engage with the regulator and will update investors when the FCA provides greater clarity on the scale and timeline of redress.
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Lloyds sets aside extra £800m to cover car loan mis-selling fallout