London, March 31, 2026, 15:18 BST
- Lloyds flagged that the FCA’s finalized motor finance compensation rules don’t match the draft version released in October, saying the changes require “careful analysis.” Investegate
- The FCA has revised its figures: £7.5 billion in customer compensation, total industry costs up to £9.1 billion, and eligibility stretching over 12.1 million agreements.
- Lloyds, which had put aside £1.95 billion to cover the scandal, saw its shares climb on Tuesday, moving up with other lenders hit by the issue.
Lloyds Banking Group on Tuesday said it’s reviewing the effects of Britain’s finalized motor finance compensation scheme, following the Financial Conduct Authority’s decision to cut the industry’s expected liability from what was proposed in last year’s consultation. Lloyds shares climbed in London after the announcement.
The significance of the ruling lies in its connection to one of British finance’s most expensive mis-selling scandals. At the heart of the case: undisclosed commissions and commercial relationships between lenders and car dealers, practices that could have driven up borrowing costs for customers. Lloyds has already earmarked £1.95 billion, but is sticking with its target of delivering a return on tangible equity above 16% by 2026, the group’s key profitability metric.
The FCA estimates that 12.1 million agreements made from 2007 through 2024 are eligible for compensation, putting average redress at around £830 and total payments near £7.5 billion. That overall figure is lower than before, after the regulator cut its claim assumption to 75% of eligible customers—down from 85% back in October. To avoid delays, the FCA divided the scheme: claims before April 2014 are handled separately, so any legal dispute over older cases won’t stall payments on newer ones.
Lloyds offered little in the way of commentary. “The details of the final scheme differ from the scheme as laid out in October 2025 and require careful analysis,” the bank said. It added it will update the market when it sees fit. Investegate
Some relief showed up in the numbers: Lloyds climbed 1.3% to 92.44 pence early on, while Close Brothers advanced 3.0%. Barclays added 1.0%, Alliance News data showed.
KPMG UK’s head of banking, Peter Rothwell, called the FCA move a step toward “greater clarity” for lenders, though he described the process as still a “substantial exercise”. Now, he said, firms have to “unpick the detail and move quickly from planning to execution” before the first deadline on June 30, 2026. KPMG
FCA chief Nikhil Rathi accused firms of having “broken the law” and called a redress scheme the “fairest and quickest way” to resolve the matter. The watchdog expects millions of claims to be settled in 2026, with most wrapped up by the end of 2027. FCA
Lloyds posted a £6.7 billion pretax profit for 2025 back in January, bumping up its 2026 forecast. Chief Executive Charlie Nunn credited “continued business momentum” for the brighter outlook. Still, the lender called its £1.95 billion charge for motor finance just a “best estimate” at the time, warning that number could move after the final rules drop. Reuters
The case isn’t settled yet. Lloyds hasn’t confirmed if the final rules will require it to top up its existing provisions, and the true cost still hangs on how many qualifying customers come forward—or if new legal challenges materialize from borrowers or lenders.
In its annual results, the bank noted that a significant number of motor finance cases had been stayed—put on hold pending further developments. The Court of Appeal is set to rule in April on whether several consumer claims, each alleging unfair loan relationships, can be merged into a single court action. The FCA’s latest move has brought some structure to the sector, though not a final resolution.
