Lloyds Bank boss: No evidence of harm in motor finance scandal
Lloyds Banking Group’s chief executive faced a grilling from the Treasury Select Committee on Tuesday over the lender’s historical exposure to the motor finance market.
Charlie Nunn, the bank’s boss, said there was “no evidence of harm” from the firm’s operations in the car financing market.
The scandal in the sector headed to the Supreme Court in early April as lenders argued for an overturning of the Court of Appeal’s ruling that it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent.
Nunn said he expected a ruling from the highest court in the land in July.
The Financial Conduct Authority (FCA) has pledged to conduct an industry-wide redress scheme within six weeks if an adverse ruling is handed to the lenders.
Analysts have anticipated “shockwaves” across the banking and wider financial services industry if the Supreme Court reiterates the Court of Appeal’s judgment.
But Nunn reiterated Lloyds “don’t have evidence of harm, or that we’ve broken regulation.”
The banker instead said the “Court of Appeal seems to be at odds with 30 years of legislation” and called for “clarity” in the court’s judgment.
“Without clarity it will create dysfunction in the market,” he warned.
Barclays have hundreds on staff for motor finance complaints
Lloyds leads the pack for provisions reserved for the motor finance scandal with £1.2bn.
Barclays has reserved £90m. The lender’s UK chief executive Vim Maru commented on a surge in complaints relating to motor finance, despite exiting the market in 2019. He emphasised certain complaints dated back two decades, which made them “harder” to deal with.
Maru said Barclays had “a few hundred staff dedicated to this to deal with processing and in preparation of supreme court decision when further enquiries come”
Analysts at RBC Capital projected total compensation for the motor finance scandal could reach as high as £32bn.
In a base case, analysts had the banking sector on the hook for £5.9bn. But this figure doubled to £10.8bn in a downside scenario.
Should the saga steer towards a ‘worst case,’ Lloyds would be faced with a £4.6bn blow.
Despite the rising provisions, Nunn said there had been “no material changes in consumer behaviour”.
“It will all depend on the specifics of the decision.”