London, May 9, 2026, 16:09 BST
- The UK’s FCA doesn’t expect a tribunal to hear legal challenges over its motor finance compensation scheme until at least October.
- Lloyds is holding on to its £1.95 billion provision for motor finance redress, though the finance chief cautioned there’s still uncertainty.
- Lloyds ended Friday at 99.03 pence, gaining 1.08% ahead of the weekend.
Lloyds Banking Group plc will have to wait longer for answers on one of its most significant legal and conduct issues, after Britain’s Financial Conduct Authority said hearings on challenges to its £9.1 billion motor finance redress scheme probably won’t take place before October. The FCA also advised lenders to brace for the potential cancellation of the scheme.
This is significant right now, since the FCA was aiming for compensation payouts to start this year. Lloyds—under scrutiny given its Black Horse motor finance arm—has informed investors that its £1.95 billion provision stays put for the moment, but questions still linger.
Motor finance deals where lenders failed to disclose commissions to customers—often via car dealers—fall under the scheme. According to the FCA, 12.1 million agreements are covered, spanning April 6, 2007, through Nov. 1, 2024. The regulator puts the redress figure at around £7.5 billion, with the total industry hit reaching £9.1 billion.
The FCA told firms to push ahead with preparations for the scheme: spot relevant complaints, pull together commission and disclosure details, and get those implementation plans in by May 12. Lenders also need to brace for a “complaint-led” fallback scenario, where customers would have to bring claims themselves if the industry-wide route doesn’t materialize. FCA
Mercedes-Benz and Volkswagen, plus two others—one a consumer group—are pushing back against the FCA’s proposal, according to Reuters. Lloyds, Barclays, and Santander’s UK unit, having already provisioned for customer claims, agreed to the updated plan.
After posting first-quarter numbers, Lloyds CFO William Chalmers told analysts the £1.95 billion motor provision is still the bank’s “best estimate”. Chalmers called the FCA’s proposals “disproportionate”, but said pressing forward made sense for customers, the group, and shareholders. MarketScreener
Lloyds saw a lift in its first-quarter statutory pretax profit, reaching £2.0 billion—a 33% jump year-on-year. The bank also left its motor finance provisions untouched for the quarter.
But the motor finance question continues to hang over the shares. Chalmers noted the bank has run through several possible response rates, costs, and court scenarios. He pointed out the legal process could push the final hit “upwards, but also downwards”. MarketScreener
It’s not just about the bill’s amount anymore. Should the tribunal strike down the scheme, the FCA warned it might have to look at putting forward a new version, running another consultation, or perhaps abandoning the plan entirely. Lenders could see costs go up, customers might be left waiting even longer, and some borrowers could miss out on compensation unless they file complaints.
Lloyds is facing the delay at a time when UK banks continue to see a boost from elevated interest income. Back in April, the group projected net interest income for 2026 would top £14.9 billion, citing lending expansion and support from its structural hedge—a tool banks rely on to steady earnings against rate swings.
Friday didn’t see a wholesale pullback from investors. Lloyds ended the session in London at 99.03 pence, a 1.08% gain. The market is closed Saturday.
The next big hurdle isn’t about money but paperwork: lenders have to file their implementation plans with the FCA by May 12. The regulator, for its part, is counting on a tribunal decision no sooner than mid-November. That leaves Lloyds facing several more months with a hefty provision stuck on its balance sheet and the ultimate cost of the car finance saga unresolved.
