The Financial Conduct Authority announced a revised motor‑finance redress scheme on March 30 2026 that raises the average payout to £830 and increases the total estimated redress to £7.5 billion, up from the earlier £7.0 billion forecast. Lloyds Banking Group issued a statement the following morning, noting that the final scheme details differ from the October 2025 proposal and that the group is assessing the implications.
The FCA’s updated scheme is split into two parts: Scheme 1 covers agreements from April 2007 to March 2014, and Scheme 2 covers agreements from April 2014 to November 2024. The total cost to consumers is £7.5 billion, with overall costs including administration estimated at £9.1 billion. Lloyds, through its Black Horse brand, is the UK’s largest car‑finance provider and has already set aside a £1.95 billion provision for motor‑finance losses.
Lloyds’ provision of £1.95 billion reflects the bank’s exposure to the redress scheme. The new FCA rules may require a further adjustment to that provision, which could modestly reduce earnings for the current and upcoming periods. The bank’s 2025 financial results – a statutory profit after tax of £4.8 billion and a return on tangible equity of 12.9% (14.8% excluding the motor‑finance provision) – demonstrate a strong baseline, but the additional provision would tighten profitability margins.
Management said, "The details of the final scheme differ from the scheme as laid out in October 2025 and require careful analysis. Accordingly, the group is assessing the implications and impact of the final rules. The group will update the market as and when appropriate." Lloyds also expressed disagreement with the FCA’s compensation methodology, arguing that it does not closely reflect actual customer loss.
Investors reacted positively to the announcement, citing the clarity on Lloyds’ potential exposure and the lower overall industry cost estimate. The market viewed the provision update as a sign that the bank is taking a proactive stance, while the reduced industry cost estimate offered some relief to the broader sector.
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