The United Kingdom’s Financial Conduct Authority (FCA) has said the car finance mis-selling scandal will cost UK banks £8.2 billion, marking one of the country’s biggest consumer compensations.
The figure, while below initial forecasts of £9 billion to £18 billion, underscores the scale of misconduct that has gripped the motor finance industry for years.
At the heart of the scandal are hidden commissions paid by lenders to car dealerships, which regulators say incentivised higher interest rates on millions of vehicle loans.
The FCA said last month that “most people were likely to receive less than £950 for each agreement,” signalling modest payouts despite widespread exposure.
Lloyds Banking Group, through its Black Horse unit, has taken a £1.2 billion provision to cover the cost of compensation.
However, Close Brothers faces the largest proportional hit, with roughly one-fifth of its loan book tied to car finance, making it particularly vulnerable.
The FCA’s findings mark a reckoning for the car finance market, highlighting how opaque commission structures eroded consumer trust and inflated borrowing costs. The regulator’s final cost estimate signals a pivotal step toward closing one of Britain’s largest mis-selling chapters.
