Lloyds to increase provisions for FCA motor finance redress

Lloyds Banking Group said it is likely to increase the amount it has set aside to cover compensation under the UK regulator's proposed motor finance redress scheme, after the Financial Conduct Authority published details of a programme that could cover about 14.2 million agreements and cost industry participants up to 11 billion pounds. Lloyds, which owns major motor lender Black Horse, had previously held roughly 1.2 billion in provisions and said additional provision is now likely and could be material. The bank later indicated it would add about 800 million, bringing its total reserves for the issue to nearly 2 billion, according to its statements to investors.

The FCA set out a scheme to compensate consumers who entered motor finance agreements between 2007 and 2024 that may have been unfair because firms did not properly disclose commission arrangements. The regulator estimated direct payouts of around 8.2 billion assuming roughly 85 percent take up, with overall costs rising to about 11 billion after implementation and operational expenses are included. The FCA has placed the onus on lenders to identify and process eligible cases, requiring firms to demonstrate that...