Lloyds Banking Group has estimated the car finance compensation scheme could cost the bank nearly £2 billion, after putting aside an extra £800 million for the mis-selling saga. The banking group said it was expecting there to be a higher number of historical motor finance agreements that are eligible for redress than it previously thought.

This follows the UK watchdog, the Financial Conduct Authority (FCA), publishing the details of its proposed compensation scheme last week. The FCA said payouts were due on around 14 million unfair deals, averaging at about £700 each.

Lloyds’ additional £800 million provision brings the total value of its reserves set aside for the issue to £1.95 billion, including payouts to customers and operational costs.

Some 14 million car finance agreem

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