LONDON, April 2, 2026, 13:04 BST.
Lloyds Banking Group said on Thursday it would keep unchanged the £1.95 billion it has set aside for motor finance compensation after reviewing the UK watchdog’s final rules for an industry-wide payout plan. The bank said the review did not point to any immediate need for a higher provision and that investors would get another update with first-quarter results on April 29. 1
That matters now because Lloyds, through its Black Horse motor finance arm, sits near the centre of the scandal. Reuters reported the Financial Conduct Authority’s redress scheme — a sector-wide compensation plan — covers about 12.1 million agreements, with average payouts around £830 and total industry costs of roughly £9.1 billion. 2
Barclays has set aside £325 million for the issue and Close Brothers £300 million. Close Brothers said earlier this week it was still assessing the implications, a reminder that the FCA’s ruling has not settled the bill across the sector. 3
Deutsche Bank analyst Robert Noble said he did not expect Lloyds to make a material change. The final scheme came in softer than the earlier proposal, he said, which should leave the bank close to its current reserve. 4
Peter Rothwell, head of banking at KPMG UK, said the FCA’s move gave lenders more clarity but still left them with a “substantial exercise”. His message was blunt: banks now need to “move quickly from planning to execution”. 5
The free-to-use scheme is meant to compensate motorists who were not told clearly about commissions or about arrangements that steered them toward one lender, factors the FCA said could have pushed up borrowing costs. The watchdog wants millions of claims paid this year. 6
Lloyds raised this reserve by £800 million in October, taking the total to £1.95 billion, after saying the FCA’s earlier consultation suggested more historical cases dating back to 2007 could fall into scope. In January, the bank said motor finance costs would weigh on 2025 results even as annual profit rose 12% and it lifted its 2026 profitability target. 7
But the bill is not fixed. Reuters said the FCA cut its headline estimate in part by lowering the share of eligible consumers it expects to claim to 75% from 85%, and AJ Bell’s head of financial analysis Danni Hewson said further legal action by lenders or complainants could yet slow compensation. 2
