Lloyds Banking Group PLC (LSE:LLOY) is among a trio of lenders facing a class action lawsuit after allegedly overcharging motor finance customers higher rates to fund brokers’ commissions.
Customers could have been overcharged by almost £1 billion between 2015 and 2021, the lawsuit, filed in London’s High Court last month, claimed.
Lloyds’ subsidiary Black Horse faces claims for £624 million, while Santander UK and MotoNovo Finance allegedly overcharged by £166 million and £209 million respectively.
This was done by car dealers and credit brokers bumping up interest rates on finance deals in return for higher commissions from the trio - a practice banned by Britain’s financial watchdog in 2021.
“Customers unknowingly paid more for their car loans,” class representative Doug Taylor said, equating to up to £1,100 for some, as the lenders looked to “incentivise dealers”.
The legal action aims to “hold large companies to account,” law firm Scott + Scott added, with the lawsuit being funded by litigation financer Woodsford.
“New rules were set out for the industry in 2021 which we have implemented,” a Black Horse spokesman commented.
“We continue to comply with regulatory requirements that apply in relation to the payment of commission and the disclosure of commission to customers.”
MotoNovo Finance and Santander UK declined to comment while the legal proceedings are active.
A decision will be made by the High Court’s Competition Appeal Tribunal on whether the case, which marks the first class action on the practice since the 2021 rule change, can proceed.