Lloyds reviews court ruling on car loan commissions

LONDON – Lloyds Banking Group (LON:) PLC is evaluating the implications of recent UK Court of Appeal decisions that could change how motor finance commissions are disclosed. The court ruled that car dealers, acting as credit brokers, must inform customers about the commissions they receive from lenders for arranging loans, and that lenders are liable for any failure to disclose by dealers.

The decisions in the cases of Wrench, Johnson, and Hopcraft establish a new standard for transparency in the motor finance industry, requiring disclosure of the existence, nature, and amount of any commission paid. This represents a significant shift from previous practices, which were guided by Financial Conduct Authority (FCA) regulations and past legal precedents.

Lloyds Banking (NYSE:) Group, along with other lenders, intends to appeal the decisions to the UK Supreme Court. The Group’s compliance framework regarding commission disclosures was previously based on the understanding of regulatory guidance and legal authorities.

The Group is currently assessing the potential financial impact of the court’s decisions and any wider consequences for its motor finance operations. It has stated that it will provide updates to the market as necessary, based on the outcome of the appeal applications and further analysis.

This situation follows a broader review by the FCA into motor commission models, which these court decisions have surpassed in scope. The industry and investors are now awaiting further developments, particularly the potential effects on the Group’s financials and operations in the motor finance sector.

The information in this article is based on a press release statement from Lloyds Banking Group PLC.

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