Lloyds shares slump as analysts warn of £3.9bn motor finance bill
Shares in Lloyds Banking Group and Close Brothers slump further on Monday after a landmark court ruling that could expose motor finance providers to billions of pounds in extra compensation.
On Friday, the Court of Appeal resoundingly sided with consumers and ruled it unlawful for car dealers to get a commission from lenders “without obtaining the customer’s fully informed consent to the payment”.
The FCA announced in January that it would review whether customers were unfairly charged high interest rates between 2007 and 2021, when DCAs were banned.
The agreements allowed brokers to adjust interest rates on car finance without the knowledge of the borrower.The test case is set to influence the Financial Conduct Authority’s (FCA) decision on whether to implement a redress scheme as part of its probe into the so-called discretionary commission agreements (DCAs).
The ruling sent shares in some of the most exposed banks down sharply on Friday as investors digested the decision.
Lloyds’ stock price dropped as much as 2.9 per cent this morning, making the worst performer on the blue-chip FTSE 100 index.
Meanwhile, Close Brothers was the biggest faller on the mid-cap FTSE 250 after plunging as much as 10 per cent. The stock has been in freefall since Friday, when it cratered a record 25 per cent.
October 28, 2024