Proactive Investors - Lloyds (LON:LLOY) Bank has confirmed that a ruling last week over motor loan commissions might mean compensation payments for mis-selling are higher than expected.
In a statement today, the bank noted Friday's Court of Appeal decision on the case of Hopcraft and Close Bros relating to motor commission arrangements.
The Court of Appeal ruled that motor dealers acting as credit brokers owe certain duties to disclose to their customers the commission payable to them by lenders and that lenders will be liable for dealers' non-disclosures.
Lloyds, in similar wording to a Close Bros statement on Friday, said this “sets a higher bar” for commissions than previously understood.
“Our understanding of compliant disclosure was built on FCA / regulatory guidance and previous legal authorities.
“These [Appeal Court] decisions relate to commission disclosure and consent obligations which go beyond the scope of the current FCA motor commissions review.”
Lloyds added it is assessing the potential impact of the decisions, as well as any broader implications, pending the outcome of the appeal applications to the Supreme Court.
The bank has already set aside £450 million for potential claims following the announcement of an initial investigation from UK financial regulator the FCA, though some City analysts had suggested Lloyds’ final bill would be much higher and possibly as much as £2 billion.
Shares in Lloyds and Close Bros fell heavily on Friday when the Hopcraft case ruling was announced.
Lloyds was down a further 0.9% to 57.1p today with Close Bros dropping 1.1% to 273.4p.