Lloyds Banking Group has announced that it will set aside an additional £800 million to cover customer remediation costs related to the UK’s motor finance scandal, bringing its total provision to £1.95 billion, as reported by Reuters.
Last week, the Financial Conduct Authority (FCA) proposed a redress scheme which would likely leave auto lenders on the hook for between £8.2 and £9.7 billion, depending on consumer uptake. The scandal stems from auto lenders’ use of “discretionary commissions,” which incentivized finance brokers and dealers to raise interest rates on auto loans. “Many motor finance lenders did not comply with the law or the rules,” said FCA CEO Nikhil Rathi. “Now we have legal clarity, it’s time their customers get fair compensation. Our scheme aims to be simple for people to use and lenders to implement.”
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