Lloyds Banking Group PLC (LSE:LLOY) told investors that it will make an extra £800 million charge for the motor finance redress scheme, bringing its total provisions to £1.95 billion.
The lender questioned the Financial Conduct Authority's proposed methodology, announced a week ago, stating it does not reflect actual customer loss or align with the Supreme Court's judgment in early August.
Lloyds said the additional charge reflects a higher likelihood of redress for a larger number of historical cases, particularly those involving discretionary commission arrangements dating back to 2007.
It cited the FCA's redress calculation approach, which it noted was less closely tied to actual customer loss than previously assumed.
In a statement, the bank said: “The group remains committed to ensuring customers receive appropriate redress where they suffered loss, however the group does not believe that the proposed redress methodology outlined in the consultation document reflects the actual loss to the customer.”
It added: “Nor does it meet the objective of ensuring that consumers are compensated proportionately and reasonably where harm has been demonstrated.”
Lloyds also criticised the FCA’s approach to defining unfairness in the redress scheme, saying it “does not align with the legal clarity provided by the recent Supreme Court judgment in Johnson”.
While the FCA proposals remain at the consultation stage, Lloyds said it will make representations to the regulator and that the ultimate outcome may still evolve.