7.23am BST
Lloyds doesn’t expect ‘material’ change to car finance provisions
Lenders exposed to the car finance scandal are issuing statements this morning, ahead of the opening of the London stock exchange at 8am.
Lloyds Banking Group says it has undertaken an initial assessment of the impact of Friday’s supreme court judgment.
Lloyds, which had previously set aside £1.2bn to cover compensation payments, has told the City that “whilst the judgment announced on 1 August provides additional clarity, there remain a number of uncertainties that the Group continues to consider in its approach to provisioning.”
The bank says:
After initial assessment of the Supreme Court judgment, and pending resolution of the outstanding uncertainties, in particular the FCA redress scheme, the Group currently believes that if there is any change to the provision it is unlikely to be material in the context of the Group.
The provision will continue to be reviewed for any further information that becomes available, with an update provided as and when necessary.
7.18am BST
Introduction: City investors to give verdict on car finance scandal ruling
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The latest twists in the UK car finance scandal could grip the City today, as investors try to estimate where the financial impact will land, and how heavy it will be.
Yesterday afternoon, Britain’s financial regulator said it would open a redress scheme for consumers who were treated unfairly when they bought a vehicle using car finance, and “secret” commission payment were made to car dealers.
The Financial Conduct Authority (FCA) will consult on the redress scheme, which could cost banks between £9bn and £18bn. Motorists who were mis-sold car finance were warned that they are likely to get less than £950 a claim.
Nikhil Rathi, chief executive of the FCA, said last night:
“It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated. We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.”
“Our aim is a compensation scheme that’s fair and easy to participate in, so there’s no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get.”
“It will take time to establish a scheme but we hope to start getting people any money they are owed next year.”
The FCA is acting after the UK supreme court partly overturned a landmark Court of Appeal case on hidden car finance commission claims on Friday, a move that looks like a partial win for lenders.
The court rejected two claims which alleged that commissions paid to car dealers were bribes, and that dealers owed a duty of loyalty to the customer.
As my colleague Kalyeena Makortoff explains here, the court appears to have closed the door to compensation except in more serious cases, although they did uphold a third case of a customer, Marcus Johnson, concluding that he had been treated unfairly.
Martin Lewis, founder of MoneySavingExpert.com, has told Sky News the consultation is “likely to mean 40% of people who got a car finance deal between 2007 and 2021 will be due some form of redress, likely to be hundreds not thousands of pounds”.
The Supreme Court ruling came just after the London stock market close on Friday night.
The market reopens at 8am, so we’ll see how the City reacts to the verdict, and the FCA’s compensation scheme, shortly…
The agenda
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3pm BST: US factory orders report for June
Updated at 7.27am BST
