Lloyds profits tumble amid car loan scandal
Lloyds Banking Group profits fell by more than a third in the third quarter, as the lender prepared for a surge in compensation payouts linked to the FCA’s car loans commission scandal.
The bank reported pre-tax profits of £1.17bn for the three months to the end of September, down 36% from £1.8bn in the same period last year, News.Az reports, citing foreign media.
The decline follows an additional £800m provision to cover the potential costs of a redress scheme proposed by the Financial Conduct Authority (FCA), bringing Lloyds’ total compensation pot to £1.95bn.
Lloyds, the UK’s largest car lender through its Black Horse division, is expected to bear the biggest financial burden among its peers.
The FCA scheme, currently under consultation, could cost car lenders a combined £11bn, addressing 14 million historic car loan contracts potentially deemed unfair due to controversial commission arrangements with car dealers.
While the regulator aims to start payouts next year, the proposed scheme faces potential legal challenges from affected lenders. Lloyds’ CFO William Chalmers emphasized that it is “too early to speculate” on any legal action and highlighted the bank’s focus on constructive dialogue with the FCA. He reaffirmed the bank’s commitment to “compensate customers appropriately where harm has been suffered.”
Lloyds also expressed concern that the scheme could cover up to 44% of car loans issued since 2007, which the bank believes may exceed what can reasonably be considered unfair.
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