The finance boss of Lloyds Banking Group has refused to rule out a legal challenge to the financial watchdog’s motor finance redress scheme after the bank’s provision for payouts under the scheme dealt a blow to its bottom line.
William Chalmers, the chief financial officer of Lloyds, said the FTSE 100 giant was “concerned” about the proposed scheme from the Financial Conduct Authority (FCA).
He added the scheme risked “producing anomalous outcomes for customers” which was “not a sensible place to be”.
“We will be very much playing our role in the FCA consultation process and we do hope that results in a constructive dialogue”.
When pressed whether the lender would take the FCA to court should its redress not fall within Lloyds’ preferred scope, Chalmers said: “I shan’t comment any further on what we’ll do beyond the consultation process itself.”
‘Not proportional or reasonable’
Charlie Nunn, the chief executive of Lloyds, sounded the alarm on the redress scheme earlier this week, warning it could knock two decades of profitability off the car finance industry.
Lloyds raised its provisions to £2bn for the car-misselling scandal earlier this year, after adding an additional £800m.
It followed the Supreme Court siding with lenders on two out of three cases relating to the car-misselling saga, but upholding the case of one claimant under the grounds their 55 per cent commission was “unfair.”
In the FCA’s redress – which is under consultation until November 18 – the watchdog said the threshold would be 35 per cent. Near 14.2m agreements are estimated to be eligible.
Lloyds – which owns the UK’s largest motor finance lender Black Horse – has said the scheme is not proportional or reasonable in ensuring customers were rightly compensated and it did not reflect the “actual loss” of borrowers.
It added the Financial Conduct Authority’s approach to “unfairness” did not align with the legal clarity provided by the Supreme Court in August.
Following criticism from motor finance lenders, the FCA said: “Recent court judgments show that liabilities exist no matter what. We believe our scheme is the best way to settle the issue for both consumers and firms, and alternatives would be more costly and take longer.”
The regulator added: “We recognise not everyone will get everything they would like. But it’s vital we draw a line under the issue so a trusted motor finance market can continue to serve millions of families every year.”