UK’s Lloyds Banking Group added £800 million to cover car-finance mis-selling, taking its total provision to £1.95 billion. The bank said the UK regulator’s fresh consultation points to more historical cases, dating back to 2007, being eligible for compensation, and criticised parts of the proposed calculation method.
The move follows the Financial Conduct Authority’s October 2025 consultation on an industry-wide redress scheme for loans affected by discretionary commission arrangements (DCAs), where dealers could increase borrowers’ rates to earn higher commissions.
The FCA now estimates £8.2 billion in payouts (on an 85% take-up) plus £2.8 billion in implementation costs, implying about £11 billion total bill across lenders. It also puts the average payment around £700 across more than 14 million contracts from April 2007 to November 2024.
Lloyds, Britain’s largest motor-finance provider through Black Horse, argued the FCA’s approach is “less closely linked to actual customer loss than previously anticipated,” and said it will push for changes during the consultation, which closes November 18, 2025 for redress proposals.
What counts as redress under the FCA plan
Contrary to some commentary, the FCA does not propose simply repaying “full commission + 8% interest.” The consultation outlines a hybrid method to estimate overpayment (including an APR adjustment) and then adds simple interest at the Bank of England base rate +1 percentage point per year from when the overpayment occurred until the redress is paid. An 8% simple-interest rate applies only if the lender pays later than one month after the final determination.
The regulator banned DCA models on January 28, 2021, after finding they incentivised rate-padding by brokers and dealers.
Scale and sector impact
News of the top-up provision underscores how the case is becoming one of the UK’s largest retail-finance clean-ups since PPI, which saw banks pay out more than £38 billion to customers last decade.
Other lenders have also built buffers. Close Brothers confirmed a £165 million provision in results on September 30, 2025. BMW Financial Services UK has set aside upwards of £207 million, according to recent filings and trade-press reports.
Analysts and trade outlets broadly peg the scheme’s headline redress at £8.2 billion (with a £11 billion all-in impact including operations), aligning with the FCA’s modelling; some media still cite an £11–£12.4 billion range depending on assumptions.
