Lloyds expects 'material' extra provisions for motor finance redress
By Benjamin Chiou
Date: Thursday 09 Oct 2025
(Sharecast News) - Lloyds has revealed it will need "material" additional provisions to provide redress to customers in the motor finance mis-selling scandal.
The Financial Conduct Authority ruled this week that lenders would have to pay out £11bn including costs in compensation after finding "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.
The FCA expects payouts on 14m finance agreements with customers receiving an average £700 in compensation per agreement, after having previously estimated that claimants would receive "less than £950" per deal. The estimated £8.2bn in total redress before costs is significantly lower than the FCA's initial prediction of a hit between £9bn and £18bn.
However, Lloyds, which has already put aside £1.2bn to cover possible costs, predicted that additional provisions would be required - though its review of the FCA assessment is still ongoing.
"Uncertainties remain outstanding on the interpretation and implementation of the proposals but based on our initial analysis and the characteristics of the proposed scheme, an additional provision is likely to be required which may be material," Lloyds said in a statement.
"This remains subject to ongoing analysis and review of the proposals. The group will continue to update the market as and when appropriate."
In a emailed note on Wednesday, broker Panmore Gordon said: "The exact application of the FCA proposals to any market participant, and therefore whether provisions established to date are adequate, remain unclear although that will not stop further speculation from many commentators."
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