Just as major banks and lenders try to recover from the cost consequences of the PPI scandal, where policies were missold or added to the account with the borrower’s knowledge, a new probe by the Financial Conduct Authority (‘FCA’) into car finance is causing some worry. Lloyds Banking Group has set aside £450m, to cover the potential cost of complaints about its car finance offerings under Black Horse.
The FCA began investigating claims of commission hidden in car finance agreements back in April 2017 – it discovered that some consumers were paying more for their car finance because the lender had included the commission it pays to their brokers in the agreement and brokers were encouraged to give consumers higher interest rates, to increase the amount of commission they got paid.
Following the FCA’s announcement in January this year that it was looking into whether consumers could be due compensation for being overcharged on their car finance agreements, banks and lenders are bracing themselves for a fresh load of complaints – and the costs that accompany them.
