Lloyds Banking Group almost tripled the amount it reserves to cover the automobile financing sales scandal at 1.2 billion pounds Sterling, making its profits for the year.
It reserves an additional 700 million pounds to cover the potential remuneration payments, in addition to 450 million pounds sterling affected earlier.
Lloyds, and other finance providers for car loans, are under fire so as not to be clear enough on the commission paid to car dealers, with millions of motorists potentially online for compensation.
However, the group’s CEO Charlie Nunn told the BBC that the problems related to automotive financing were not comparable to the erroneous sales scandal of the PPI, which cost billions of banks.
Nunn said that the provided provision to cover potential car financing remuneration payments was the “best estimate of the bank at this stage” and that the overall performance of the bank was solid.
“The underlying performances have been really robust and we have experienced very good growth in the company,” he said.
However, the bank declared a profit before tax of 5.97 billion pounds sterling, compared to 7.5 billion pounds sterling a year earlier.
In April, the Supreme Court will rule on the question of whether the people forcing car loans have been properly informed of how the commission was paid, which may have led them to be billed more.
About two million new and used cars are sold using financing agreements each year, customers paying an initial deposit, then monthly costs, including interest.
Banks and other lenders can now be online to pay compensation on certain transactions, in particular before changing the rules in 2021.
A previous erroneous sales scandal around insurance protection insurance (PPI) a decade ago finally cost the banks of tens of billions of pounds.
The total paid by Lloyds on the PPI SAGA amounted to 21.9 billion pounds sterling in 2019.
Lloyds had the largest bill of all banks for the erroneous sale of the insurance policy – which aimed to cover loan payments if, for example, customers fell ill. But insurance was often sold to people who did not want it or did not need it.
