Lloyds boss: Motor finance redress wipes 20-year profit off industry
The boss of Lloyds Banking Group has warned the financial watchdog’s motor finance redress scheme could knock two decades of profitability off the car finance industry.
Charlie Nunn, the bank’s chief, has doubled down on the lender’s previous warning shots, adding he didn’t think the scheme was “proportionate”.
The FTSE 100 titan has pulled no punches in its criticism of the Financial Conduct Authority’s (FCA) redress scheme for the car-misselling scandal, accusing the watchdog of misinterpreting the Supreme Court’s August ruling.
Nunn said: “When you look at the implication of what’s been proposed by the FCA, it’s going to potentially take 20 years of profitability off the car finance industry.”
The bank boss warned the consequences of the scheme could hamper the “investability of the UK”.
“There’s a real concern that this is going to create an investability issue,” he added.
Lloyds and peers take aim at FCA for redress
Earlier this year, the UK’s top Court sided with lenders on two out of three cases relating to the car-misselling saga, but upheld the case of one claimant under the grounds their 55 per cent commission was “unfair.”
However, the FCA has said the threshold for its redress – where 14.2m agreements are estimated to be eligible – will be 35 per cent.
Analysts have raised concerns over the “forensic” level of governance expected to be on lenders throughout the scheme as they attempt to prove their deals were not “unfair”.
Nunn’s fresh remarks, made in an interview with Sky News, follow Lloyds last week hiking its provisions to near £2bn after an additional £800m was set aside.
Lloyds owns the UK’s largest motor finance lender Black Horse.
Nunn told the Treasury Committee in May there was “no evidence of harm” in the firm’s operations in the car financing market as he faced pressing questions from MPs.
FTSE 250 lender Close Brothers has followed suit with the banking giant, near-doubling its provisions to £300m as it took a swing at the FCA’s redress scheme.
The group said: “[Close Brothers] does not believe the redress methodology proposed by the FCA appropriately reflects actual customer loss or achieves a proportionate outcome.”