London, May 9, 2026, 16:09 BST
- Britain’s FCA said a tribunal hearing on legal challenges to its motor finance compensation scheme is unlikely before October.
- Lloyds has kept a £1.95 billion provision for motor finance redress, but its finance chief said uncertainty remains.
- Lloyds shares closed Friday at 99.03 pence, up 1.08%, before the weekend.
Lloyds Banking Group plc is facing a longer wait for clarity on one of its biggest legal and conduct overhangs after Britain’s Financial Conduct Authority said challenges to its £9.1 billion motor finance redress scheme are unlikely to be heard before October. The regulator told lenders to prepare for the possibility that the scheme could be scrapped.
That matters now because the FCA had hoped compensation payments to customers would begin this year. Lloyds, one of the UK lenders most closely watched on the issue through its Black Horse motor finance business, has told investors its £1.95 billion provision remains unchanged, but not settled beyond doubt.
The scheme covers motor finance agreements where customers were not properly told about commission paid by lenders to brokers, usually car dealers. The FCA said 12.1 million agreements from April 6, 2007, to Nov. 1, 2024, are eligible, with firms expected to pay about £7.5 billion in redress and face a total bill of £9.1 billion.
The FCA said firms should keep preparing for the scheme, including by identifying relevant complaints, gathering commission and disclosure data, and submitting implementation plans by May 12. It also said lenders should be ready for a “complaint-led” fallback, meaning customers would have to pursue claims more directly if the industry-wide process falls away. FCA
Mercedes-Benz and Volkswagen are among four groups, including a consumer group, challenging the FCA plan, Reuters reported. Lloyds, Barclays and Santander’s UK arm had accepted the revised scheme after setting aside money for affected consumers.
Lloyds Chief Financial Officer William Chalmers told analysts after first-quarter results that the £1.95 billion motor provision remained the bank’s “best estimate”. He also said the bank thought the FCA proposals were “disproportionate”, but that moving on was in the interests of customers, the group and shareholders. MarketScreener
The bank’s earnings give it some room. Lloyds reported first-quarter statutory pretax profit of £2.0 billion, up 33% from a year earlier, and said it made no new provision for motor finance in the quarter.
Still, the motor finance issue keeps a cap on the investment case. Chalmers said the bank had modelled different response rates, cost levels and court challenge scenarios, and added that legal pressure could move the outcome “upwards, but also downwards”. MarketScreener
The risk is no longer just the size of the bill. If the tribunal quashes the scheme, the FCA said it may need to consider a revised scheme, further consultation, or no scheme at all; that could raise lender costs, prolong customer waits and leave some borrowers uncompensated unless they complain.
For Lloyds, the delay lands as UK banks are still benefiting from higher interest income. The group said in April it expected 2026 net interest income to exceed £14.9 billion, helped by lending growth and its structural hedge, a portfolio banks use to smooth the effect of rate moves on earnings.
Investors were not in full retreat on Friday. Lloyds closed at 99.03 pence in London, up 1.08%, with the market shut on Saturday.
The next pressure point is procedural, not financial: lenders’ implementation plans are due to the FCA by May 12, while the regulator is working on the assumption that any tribunal decision may not come until mid-November. For Lloyds, that means another few months with a large provision on the books and the final car-finance bill still open.
