Lloyds Bank assesses the implications of a recent court decision that mandates increased transparency on commissions earned in auto finance loans, according to financial news reports.
The decision requires retailers to disclose to customers any commissions they receive from lenders, such as Lloyds and Close brotherswhich could make it illegal for salespeople to earn these commissions without the customer’s informed consent.
Following the Court of Appeal decision, Lloyds shares fell sharply, reflecting market concerns about potential liabilities. The judgment raised the bar for disclosure standards in the sector, raising concerns that customers could seek compensation for undisclosed commission fees on past auto finance deals.
The issue has emerged as part of a wider regulatory probe into potential mis-selling in the industry, with companies such as Lloyds and Close Brothers already allocating substantial provisions to cover possible compensation claims.
In response, Lloyds noted that its previous approach to the commission’s disclosure had followed regulatory guidance, but acknowledged that the decision “goes beyond the scope” of the current Financial Conduct Authority (FCA) review. . The bank also noted that the companies involved in the case plan to appeal to the Supreme Court of the United Kingdom.
The case centers on discretionary commission agreements, a practice that allows brokers and car dealers to increase interest rates on financial agreements to earn higher commissions. This leads to overpayments by customers. Regulators banned this practice in 2021 after identifying its financial impact on consumers.
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Shares in Lloyds continued to fall on Monday, shedding a further 1.2% in early trading.
