Lloyds Banking Group has decided not to take legal action against the Financial Conduct Authority’s (FCA) motor finance compensation scheme, despite previously considering a challenge.
Created by the FCA, the scheme, aims to compensate customers who were mis-sold car finance deals, specifically where lenders failed to properly disclose commission arrangements and relationships with dealers over many years(2007–2024).
Although Lloyds disagrees with the FCA’s conclusions, it now believes supporting the scheme is the best outcome for both customers and its shareholders.
Lloyds through its main car finance brand, Black Horse Limited, is one of, if not the largest of finance firms exposed to paying out compensation under the scheme.
This is positive news for those consumers with older Lloyds agreements (2007-2014)covered by the scheme. The total compensation bill is estimated at about £9.1 billion, reduced from earlier forecasts of up to £11 billion.
In 2025,before the scheme was finalised, Lloyds had previously announced that it had set aside a provision of around £1.95 billion to cover its liabilities to compensate customers under any scheme brought in.
Other banks and finance firms are still deciding whether to challenge the scheme or adjust their financial provisions.
Jamie Patton, Managing Director at Johnson Law Group said: “This is good news for those with earlier agreements with Black Horse Limited, who were looking at yet more delay and uncertainty.
“Let’s hope that the bank also adopts a sensible approach to settling cases and move away from some of the sharp practices it has previously engaged in when dealing with representatives.”
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