Finance
UK's Lloyds Raises Motor Finance Mis-Selling Charge by $1.1 Billion
Published by Global Banking & Finance Review®
Posted on October 13, 2025
2 min readLast updated: January 21, 2026
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Lloyds Banking Group raises its motor finance mis-selling charge by $1.1B, affecting shares and market dynamics.
Lloyds Banking Group Increases Motor Finance Mis-Selling Provision by $1.1B
Lloyds Banking Group's Increased Provisions for Mis-Selling
LONDON (Reuters) -Britain's Lloyds Banking Group said on Monday it would take an additional charge of 800 million pounds ($1.1 billion) to compensate customers for the motor finance mis-selling scandal, bringing its total provision to 1.95 billion pounds.
Impact on Shares and Market Response
The lender, one of the biggest players in motor finance, had previously set aside about 1.15 billion pounds in what is set to be one of the costliest consumer scandals for British finance.
Regulatory Adjustments and Future Implications
Lloyds said the Financial Conduct Authority's (FCA) proposed redress scheme showed that more historical cases dating back to 2007 were likely eligible for compensation, and that it would seek to challenge the regulator on its methodology.
The regulator's redress calculation approach was "less closely linked to actual customer loss than previously anticipated," suggesting payouts could be higher than the bank initially modelled, Lloyds said.
Shares in the bank, which had fallen last week when it flagged a possible "material" hike in provisions, rose 1.6% in early London trading.
LENDERS TO PERSUADE REGULATOR TO ADJUST REDRESS SCHEME
"There is some relief today that “material” top-up didn’t equate to a much larger number given that the regulator had said in their consultation that 51% of the burden would fall on banks," Benjamin Toms, an analyst at RBC, told Reuters.
Lenders will now aim to persuade the regulator to adjust the redress scheme to align more closely with customer losses and resolve discrepancies between the consultation paper and the Supreme Court ruling, he said.
Last week, the regulator proposed a redress scheme for consumers with motor finance compensation claims, estimating a total bill for lenders at about 11 billion pounds.
Shares in lender Close Brothers, which said last week it would likely need to set aside more money for compensation, also rose on Monday.
($1 = 0.7492 pounds)
(Reporting by Raechel Thankam Job in Bengaluru, Simone Lobo and Tommy Reggiori Wilkes in London; Editing by Eileen Soreng and Bernadette Baum)
Key Takeaways
- •Lloyds increases mis-selling provision by $1.1 billion.
- •Total provision reaches 1.95 billion pounds.
- •FCA's redress scheme affects historical cases.
- •Lloyds challenges FCA's compensation methodology.
- •Shares rise 1.6% after provision announcement.
Frequently Asked Questions about UK's Lloyds raises motor finance mis-selling charge by $1.1 billion
1What is compensation?
Compensation refers to the payment or reimbursement provided to customers for losses or damages incurred, often due to mis-selling or other financial misconduct.
2What is the Financial Conduct Authority (FCA)?
The Financial Conduct Authority (FCA) is a regulatory body in the UK responsible for overseeing financial markets and protecting consumers by ensuring fair practices and transparency.
3What is a mis-selling scandal?
A mis-selling scandal occurs when financial products are sold to customers under false pretenses or without proper disclosure of risks, leading to financial losses for consumers.
4What is a provision in banking?
A provision in banking is an amount set aside to cover potential future liabilities or losses, ensuring that the bank maintains adequate capital reserves.
5What are shares?
Shares represent ownership in a company and entitle shareholders to a portion of the company's profits, typically distributed as dividends.
