Lloyds Sets Aside £1.2bn for Black Horse’s Motor Finance Scandal – A Genuine Provision or Industry Misdirection?

Lloyds Banking Group has announced that it is setting aside a further £700m, taking its current provision close to £1.2 billion to cover potential liabilities arising from its motor finance division, Black Horse, in relation to the ongoing motor finance mis-selling scandal.

This revelation marks one of the largest provisions made to date in what is rapidly emerging as the next major financial mis-selling crisis.

A Significant Admission of Liability

The sheer scale of Lloyds’ provision must raise serious questions.

While the bank claims this is a responsible step to prepare for potential compensation payouts, it is also an implicit admission that significant wrongdoing has taken place within Black Horse’s motor finance operations.

The issue at the heart of the scandal is the failure of lenders and brokers to disclose commissions, leading to consumers being charged higher interest rates than they otherwise would have been.

The Industry’s Narrative – A Coordinated Effort?

Lloyds’ announcement coincides with a wider attempt by the finance industry to control the narrative ahead of the Supreme Court hearing in April.

The industry has been working tirelessly to push a misleading argument that mass compensation for affected consumers would destabilise the motor finance sector and harm the UK economy.

The FCA, government, and lenders are subtly shaping public perception, suggesting that if the Supreme Court upholds the Court of Appeal’s ruling, it would unfairly impose retrospective penalties on finance providers who were supposedly following the rules at the time.

However, this argument does not stand up to scrutiny.

The FCA’s own regulations, particularly CONC 4.5.3R, made it clear that commissions impacting the impartiality of the dealership should have been disclosed to consumers.

The existence of commission itself clearly impacted the impartiality of the dealership as it offered an incentive to propose certain finance agreements to its customers, over others, often resulting in customers paying more interest.

The reality is that the industry systematically ignored these rules, meaning finance providers are not victims of a retrospective rule change—they are simply being held accountable for breaches that were occurring all along.

A Strategy to Minimise Market Panic?

By announcing a £1.2bn provision now, Lloyds could be attempting to pre-emptively limit the damage to investor confidence.

Historically, in financial scandals such as PPI, banks initially set aside small amounts to downplay the true extent of their liabilities, only to increase provisions massively over time as claims poured in.

If history repeats itself, the £1.2bn may only be a fraction of what Lloyds will ultimately have to pay.

There is also a risk that this figure is being used to suggest that the scandal’s financial impact is both known and contained—when, in reality, the total cost to the industry could far exceed initial estimates.

Many analysts predict that if the Supreme Court rules in favour of consumers, the total compensation bill across all lenders could surpass the PPI scandal’s £38bn cost.

The Supreme Court Must Resist Industry and Government Pressure

With the Supreme Court set to make a crucial decision in April, it is imperative that justice is not obstructed by financial and political influence.

The government, under the misguided belief that mass compensation would harm the economy, may seek to interfere through regulatory bodies such as the FCA.

However, the truth is that a fair compensation process would put money back into the pockets of consumers, stimulating economic activity rather than hindering it.

The industry is attempting to muddy the waters, but the facts remain clear: finance providers systematically breached existing rules, profited massively at consumers’ expense, and now seek to avoid full accountability.

The Supreme Court must be allowed to rule based on the merits of the case, free from undue external influence.

A Watershed Moment for Financial Fairness

Lloyds’ £1.2bn provision is an important milestone in the unfolding motor finance scandal, but it should not be mistaken for the full story. If the Supreme Court upholds the Court of Appeal’s ruling, the financial implications for the industry could be far greater.

More importantly, it will represent a landmark victory for consumer rights in the face of corporate wrongdoing.

The coming months will be critical, and all eyes will be on the Supreme Court as it considers the biggest financial mis-selling case since PPI.

One thing is certain: the finance industry is bracing itself, and consumers must remain steadfast in their pursuit of justice.

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