Lenders to pay £11bn redress in motor finance scandal, FCA rules
By Benjamin Chiou
Date: Wednesday 08 Oct 2025
(Sharecast News) - Lloyds Banking Group has said it is "assessing the implications" of an announcement by the Financial Conduct Authority to charge motor finance lenders £11bn in compensation for unfair practices.
The FCA said late on Tuesday that it expects payouts on 14m finance agreements with customers receiving an average £700 in compensation per agreement. This is lower than its previous estimate of £950 per deal.
An industry-wide investigation found "widespread failings" in how motor finance firms disclosed commission payments and commercial ties between lenders and brokers on agreements signed between 6 April 2007 and 1 November 2024.
"Inadequate disclosure of commission means consumers are less likely to make informed decisions, negotiate or shop around for a better deal. Our analysis indicates that many people may have overpaid on their motor finance," the FCA said.
The regulator is now consulting on an industry-wide scheme to compensate customers, and expects 85% of eligible customers to take part, resulting in an estimated redress of £8.2bn. The estimated costs to firms of implementing and operationalising the scheme would take the total to £11bn.
"Inevitably, given the scale and complexity of such a scheme and limitations in the data we have spanning such a long time period, the estimates remain highly indicative and susceptible to change," the FCA said.
In a statement to shareholders on Wednesday morning, Lloyds said it is looking at "the impact of this consultation in the context of its current provision for this issue and will update the market as and when appropriate".
"Many motor finance lenders did not comply with the law or the rules. Now we have legal clarity, it's time their customers get fair compensation," said FCA chief executive Nikhil Rathi.
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