London, March 31, 2026, 15:18 BST
- Lloyds said the FCA’s final motor finance compensation rules differ from last October’s draft and need “careful analysis.” 1
- The FCA now estimates £7.5 billion of customer compensation and £9.1 billion of total industry cost across 12.1 million eligible agreements. 2
- Lloyds had already set aside £1.95 billion for the scandal, and its shares rose alongside other exposed lenders on Tuesday. 3
Lloyds Banking Group said on Tuesday it was assessing the impact of Britain’s final motor finance compensation plan after the Financial Conduct Authority trimmed the industry’s expected bill below the level set out in last year’s consultation. Lloyds shares moved higher in London trade after the update. 1
The ruling matters because the case has become one of the costliest mis-selling scandals in British finance. It centres on commissions and commercial ties between lenders and car dealers that were not properly disclosed and could push up the rate borrowers paid, while Lloyds has already set aside £1.95 billion and is still targeting a 2026 return on tangible equity above 16%, its main profitability measure. 4
The FCA said 12.1 million agreements written between 2007 and 2024 qualify for compensation, with average redress of about £830 and total payouts of roughly £7.5 billion. The lower total partly reflects the regulator’s revised assumption that 75% of eligible customers will claim, down from 85% in October. It split the plan into a pre-April 2014 scheme and a later one so any court fight over older cases does not automatically hold up newer payouts. 2
Lloyds kept its own response brief. “The details of the final scheme differ from the scheme as laid out in October 2025 and require careful analysis,” the bank said, adding that it would update the market when appropriate. 1
Investors took some comfort from the lower headline cost. In morning trade, Lloyds was up 1.3% at 92.44 pence, while Close Brothers rose 3.0% and Barclays gained 1.0%, according to market data carried by Alliance News. 5
Peter Rothwell, KPMG UK’s head of banking, said the FCA announcement gave lenders “greater clarity” but remained a “substantial exercise”. He said firms now had to “unpick the detail and move quickly from planning to execution” ahead of an initial June 30, 2026 start date. 6
FCA chief Nikhil Rathi said firms had “broken the law” and that a redress scheme was the “fairest and quickest way” to bring the issue to a close. The watchdog said millions of claims should be settled in 2026, with the vast majority completed by the end of 2027. 2
In January, Lloyds reported 2025 pretax profit of £6.7 billion and lifted its 2026 guidance, with Chief Executive Charlie Nunn saying “continued business momentum” let the bank upgrade its outlook. But the bank also said then that the £1.95 billion motor finance provision was its “best estimate”, leaving room for change once final rules arrived. 7
But the file is not closed. Lloyds has not yet said whether the final rules will force it to add to the money it has already set aside, and the eventual cost will depend in part on how many eligible customers actually claim and whether either lenders or borrowers mount fresh legal challenges. 1
The bank said in its annual results that many motor finance cases had already been stayed, or paused, and that the Court of Appeal is due in April to decide whether multiple consumer claims alleging unfair loan relationships can be bundled into one court claim. For now, the FCA has given the sector more shape, not full closure. 3
