Lloyds Bank Braces for Major Hit in Car Finance Saga

Lloyds Banking Group said it would make a further £800 million provision for mis-sold car finance in the UK [1] as the regulator moves towards a sector wide compensation scheme.

The bill, revealed earlier this month, comes as the price of settling car finance claims has risen with fears that millions of motorists were mis-sold the loans through hidden commissions and unfair selling techniques. Commentators have predicted that Lloyds’ higher set aside is an indication of the size of redress to come as the regulator’s new regime is implemented.

The bank’s move comes after several years of headlines about car finance mis-selling claims, which have placed consumer finance in the spotlight and prompted numerous industry-wide investigations in the motor finance sector.

FCA Consultation Opens Path for Industry-Wide Redress

On 7 October 2025, the Financial Conduct Authority launched a public consultation [2] outlining the design and scope of its proposed compensation plan for mis-sold motor finance agreements.

According to the FCA’s consultation paper (CP25/27) [3], the scheme would apply to motor finance agreements taken out between 6 April 2007 and 1 November 2024, a period spanning more than 17 years. The regulator estimates that affected motorists could receive around £700 per agreement, on average.

The FCA expects to pay compensation to millions of mis-sold car finance customers next year, marking one of the largest redress programmes ever undertaken in the consumer credit market.

Summary of the FCA’s Redress Proposal

• Eligibility: Consumers with agreements made between April 2007 and November 2024.
• Average redress: Approximately £700 per agreement, though amounts vary by case.
• Timeline: The full scheme is expected to launch in 2026, following the six-week consultation window and subsequent rulemaking period.

The regulator has also cautioned lenders that they will be required to contact customers they can trace. Those who have moved or changed contact details may risk being left out of important updates.

For consumers, this creates a very clear incentive to take action early, to make sure that their complaint is logged. Taking action now could ensure that your case is prioritised when the scheme does open.

For more background on the regulator’s findings and timeline, you can explore the latest updates on car finance claims in the UK.

What Should You Do Now?

Consumers may still:

• Complain directly to your lender,
• Go to the Financial Ombudsman Service, or
• Wait for the FCA’s redress scheme, expected to begin in 2026

All of these are free options.

Why Take Action Now?

If you’ve already complained, you’ll be among the first to be contacted once the FCA scheme begins.

Lenders are only required to contact customers they can trace. If you’ve moved or your old details have changed, it’s worth ensuring your complaint and contact information are up to date.

Filing a complaint now also ensures your case is logged and ready for review when the redress scheme officially opens.

If you haven’t yet taken action, Reclaim247 can assist by tracing your finance history and submitting a complaint on your behalf, using only your name, address, and date of birth.

No paperwork. No hassle. No win, no fee.

For detailed guidance on how compensation works, you can read their full guide to car finance mis-selling claims and the car finance scandal.

Should You Consider a Claims Management Company?

The ongoing car finance scandal has prompted many drivers to explore professional help when dealing with complex claims. A regulated claims management company can help consumers navigate the process, handle lender correspondence, and prepare necessary documentation.

However, not all firms offer the same level of service or transparency. Always check whether the company is authorised and what fees apply before agreeing to representation.

If you are unclear of where to start with or how long does Reclaim247 take, they do state that this does vary on a case to case basis depending on how quickly lenders respond and how long the FCA takes to review the case. But usually, it only takes 60 seconds to start your eligibility check.

A Turning Point for UK Motor Finance

The FCA’s consultation is a landmark moment in the UK’s car finance refund story. It sets the groundwork for what could be one of the biggest consumer compensation programmes since PPI. It finally paves the way for long-awaited redress from unfair commission models in motor finance.

With billions at stake and widespread consumer interest, both lenders and regulators face intense scrutiny. For drivers affected by PCP claims and unfair lending practices, now is the time to ensure your case is recorded and your information is up to date.

If a lender fails to respond or ignores your complaint entirely, you may wonder what happens if a company ignores the ombudsman after escalation. The FOS can ‘wag a big stick’ and impose an award on a firm in these situations, meaning that consumers have not been left without remedy.

In the course of the FCA’s consultation and final rules coming into being, millions are to benefit from long-awaited redress and compensation.

✅ Key Takeaway

The car finance claims process is entering a crucial phase. As Lloyds and other lenders gear up for payouts running into hundreds of millions of pounds, it’s time for consumers to sit up and take notice, take action now and get expert help if you think you need it. The car finance scandal has been rumbling on for years and it’s worth checking where you stand today, in readiness for when the redress scheme opens in 2026.

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References:

1. Lloyds Banking Group said it would make a further £800 million provision for mis-sold car finance in the UK - https://www.ft.com/content/78f6035e-bd72-42ae-a7b6-fc4b59c207d1
2. On 7 October 2025, the Financial Conduct Authority launched a public consultation - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
3. FCA’s consultation paper (CP25/27) - https://www.fca.org.uk/publication/consultation/cp25-27.pdf