Lloyds earmarks £1.2bn for car finance scandal

Lloyds Banking Group has astir tripled the magnitude it is mounting speech to screen the car concern mis-selling ungraded to £1.2bn, knocking its profits for the year.

It is mounting speech an other £700m to screen imaginable compensation payments, connected apical of £450m earmarked earlier.

Lloyds, and different providers of concern for car loans, are nether occurrence for not being wide capable implicit committee paid to car dealers, with millions of motorists perchance successful enactment for compensation.

However, radical main enforcement Charlie Nunn told the BBC the issues astir centrifugal concern were not comparable to the PPI mis-selling scandal, which outgo the slope billions.

Mr Nunn said the proviso made to screen imaginable car concern compensation payments was the bank's "best conjecture astatine this stage" and that the bank's wide show was strong.

"Underlying show has been truly robust and we've seen truly bully maturation successful the business," helium said.

However, the slope reported a pre-tax nett of £5.97bn, down from £7.5bn a twelvemonth earlier, arsenic the UK system faltered and involvement rates came down.

In April, the Supreme Court volition regularisation connected the question of whether radical taking retired car loans were decently informed implicit however committee was paid, perchance starring them to beryllium charged more.

About 2 cardinal caller and second-hand cars are sold utilizing concern agreements each year, with customers paying an archetypal deposit and past a monthly fee, including interest.

Banks and different lenders whitethorn present beryllium successful enactment to wage compensation implicit immoderate deals, peculiarly earlier rules were changed successful 2021.

Lloyds, which owns centrifugal concern institution Black Horse, faces a imaginable hefty bill.

"While you could reason the proviso is overly cautious, Lloyds holds the largest vulnerability of immoderate large UK bank, and the result remains uncertain," said Matt Britzman, elder equity analyst, Hargreaves Lansdown.

However Lloyds stock terms roseate pursuing its latest results, reflecting an underlying "robust performance", helium said.

Lloyds faced the largest measure pursuing the mis-selling ungraded astir outgo extortion security (PPI) a decennary ago, which yet outgo UK banks tens of billions of pounds.

Customers were compensated aft security policies - which were intended to screen indebtedness payments if, for instance, they fell sick - were sold precise widely, often to radical who did not privation it oregon did not request it.

The full paid retired by Lloyds implicit the PPI mis-selling saga stood astatine £21.9bn successful 2019.