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February 7, 2025
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Finance

Lenders could face £10bn compensation bill over car financing


Banks could face a £10 billion compensation bill for unfair car finance deals, analysts have suggested.

Last week the Financial Conduct Authority said it would investigate whether those who took out loans before January 2021 were unfairly charged more expensive interest rates in return for higher levels of commission paid to car dealers.

This model where dealers were allowed to set a borrower’s interest rate, known as discretionary commission, applied to just under 40 per cent of car finance lending between 2013 and 2016, according to the FCA.

Analysts at Numis estimated that banks, most notably Lloyds Banking Group, could face a £10 billion compensation bill if the FCA found evidence of “widespread misconduct” and banks were ordered to refund higher repayments. Royal Bank of



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