RE: Black Horse Ltd - Discretionary Commission25 Jan 2024 12:59
From todays Financial Times.
British auto lenders could face up to £13bn in compensation payouts after the UK financial watchdog said it a probe into historic commission agreements that allegedly led to consumers overpaying would scrutinise deals dating back to 2007.
The Financial Conduct Authority on Wednesday clarified the timeline of a probe it launched earlier this month into historic interest-linked deals offered by motor finance companies. The so-called discretionary commissions gave car finance brokers and dealers an incentive to raise interest rates on customer deals and were banned by the FCA in 2021.
The FCA’s clarification sent shares in Lloyds Banking Group down more than 2 per cent while shares in specialist lender Close Brothers fell nearly 3 per cent.
Analysts said Lloyds — which owns Black Horse, the UK’s largest car finance lender — is particularly exposed to an influx of compensation claims, with Jefferies estimating the lender could be hit with a total bill of £1.8bn.
Other lenders including Barclays and Santander were also likely to be affected, analysts said, while NatWest was unlikely to feel a material impact due to its low exposure to the sector.
The watchdog said its probe would include deals made between 2007 — when the Financial Ombudsman Service first started overseeing consumer credit — and 2021, leading experts to increase estimates of the total redress cost for lenders.
https://archive.is/O4Lpb
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