The financial institution announced in a press release that a provision of £800 million is necessary due to an increased likelihood of compensating more clients who faced additional charges on vehicle financing between April 2007 and November 2024.
Should this new amount be confirmed, Lloyds’ total compensation may reach £1.95 billion (€2.247 billion).
Lloyds is one of the banks most exposed to a scandal following revelations that several clients were overcharged on financing for vehicle purchases, due to improper commissions paid to car dealerships.
The group had already set aside approximately £1.15 billion (€1.32 billion) to cover potential costs.
The Financial Conduct Authority, the UK regulatory body for financial services companies, announced last week that compensations to affected clients could range from £11 billion (€12.7 billion) to £12.4 billion (€14.29 billion), to be shared among the entities involved in the scheme, should all affected parties apply and become eligible for compensation.
Lloyds stated it will review the FCA’s decision terms, arguing that the methodology used to calculate the compensation does not reflect the “actual losses” of affected customers.
In the statement, Lloyds affirmed its commitment to “ensuring clients receive appropriate compensation when they suffer losses. However, the group does not believe the methodology proposed in the FCA’s consultation paper reflects the real loss suffered by clients.”
“It also fails to meet the objective of ensuring consumers are compensated proportionately and reasonably when damage is demonstrated,” the note added.
The Finance and Leasing Association, representing vehicle financing institutions in the UK, has been warning for months that excessive compensations could destabilize the auto financing market, potentially causing some companies to go bankrupt.
Hyundai Capital UK, another involved institution, has announced a provision of £34.5 million (€40 million) for payments related to compensations. The British division of Honda Finance Europe reported having reserved £62.2 million (€71.7 million) for the same purpose.
