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(Bloomberg) — The boss of Lloyds Banking Group Plc has warned the uncertainty around lawsuits and regulatory probes into motor finance mis-selling is making it difficult for investors to have confidence in British banking, with ripple effects across the economy.
Charlie Nunn said investors had in the past few weeks raised worries about the UK’s lengthy review of car finance commission, after a court ruling that could significantly broaden the scope. The possible impact on the financial services sector, and the nation more broadly, “creates an investability problem,” he said.
“Already investors are looking at this and saying this principle of the courts coming up with decisions independently from the regulation, which is then having a significant retrospective look back, is already bleeding and bleeding across, actually, the whole economy,” Nunn said at the Financial Times Global Banking Summit in London.
He added the legal decision was “at odds with the last 30 years of regulation.”
Lloyds, the biggest provider of car finance, has already set aside £450 million ($589 million) to pay for possible compensation and other costs linked to the probe. Moody’s Corp. analysts have said the total cost for the industry could ultimately reach £30 billion.
Car loans have come under scrutiny after consumers alleged their loans were priced in a way that treated them unfairly while banks pocketed money in so-called discretionary commission arrangements with dealers, a practice banned in 2021. A Court of Appeal judgment, which several banks are challenging, also ruled on other types of commission paid to brokers.
The UK’s Financial Conduct Authority is considering giving lenders more time to respond to customers complaints regarding fixed commissions on their auto loans. The agency has also written to the Supreme Court to ask it to move quickly on deciding whether it will take up the market-moving cases.
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