Latest news with #CharlieNunn
Yahoo
2 days ago
- Business
- Yahoo
Lloyds faces questions on ‘no harm' claims amid mounting provisions
As the UK Supreme Court prepares to rule on whether car finance providers broke the law by failing to disclose commission arrangements to borrowers, a central question is coming into focus: how do lenders, such as Lloyds, justify claims of 'no harm' to customers while setting aside billions of pounds for potential redress? Lloyds Banking Group, the UK's largest motor finance lender, is at the centre of this debate. CEO Charlie Nunn told MPs on 20 May that Lloyds had seen 'no evidence of harm' in its car finance activities and argued that its motor finance arm, Black Horse, typically offered some of the lowest interest rates in the market. On that basis, he said, customers were unlikely to have found better deals elsewhere, even if dealer commissions were not disclosed. But the bank has also made two significant financial provisions. A £450 million charge was booked in late 2024 concerning the Financial Conduct Authority's (FCA) review of discretionary commission arrangements (DCAs). A second, £700 million provision followed earlier this year, after the Court of Appeal ruled that the non-disclosure of commissions could give rise to a claim in other consumer credit spaces beyond motor finance. This appears difficult to square with a claim of no customer detriment. Nunn, however, told the Treasury Select Committee that these charges should not be interpreted as admissions of harm but viewed as a result of unavoidable accounting principles. "That £450 million provision incorporates two things. One is the operational expenses of responding to claimant law firms. We have had a very large number of complaints that aren't even from our customers, so we know there are significant operational expenses in processing and trying to help customers. I don't know if they even had a policy with us, but there is a very high percentage of those. It is processing the operational complaints, supporting the customers and, if there is remediation linked to harm, paying out that remediation. "We haven't disclosed the split between those two things, but we obviously have experience. The operational expenses are very significant. We knew, based on actions that the FCA has announced, that we were going to incur significant costs. From an accounting perspective, we are legally obliged to do that. That is not linked to decisions that the FCA and Supreme Court will take on whether there was a breach of a law, whether there was harm, and if there was harm, whether appropriate remediation should be made. All those steps are independent of the accounting provision. I know that probably isn't helpful for the public, but that is the basis on which we make those decisions," he told the Committee. Even so, these provisions may also reflect the scale and complexity of proving no harm, rather than simply responding to complaints. Julian Rose, Director at Asset Finance Policy Limited, has pointed out that under the current FCA regime, the burden of proof lies with lenders. If the Supreme Court confirms that firms were required to disclose commissions, it will fall to the lenders to demonstrate that customers were not financially disadvantaged. 'In my view,' Rose writes, 'it will not be for consumers (or their representatives) to show evidence of harm. It will be for the car finance companies to show evidence of no harm. That means for each agreement, they will need evidenced that the rate provided was competitive with an industry benchmark rate.' That challenge will be especially difficult if firms no longer hold the necessary data. But will it prove more expensive for claimants or lenders? Most lenders follow standard data retention policies that delete customer records after six years. According to a recent Guardian report, claims firm Courmacs Legal says it holds around 465,000 customer complaints involving loans settled before 2018, many of which may now be missing documentation. If these consumers cannot be contacted or their agreements reviewed, they could lose out on up to £1.18 billion in compensation, Courmacs estimates. In January 2024, the FCA instructed firms not to delete car finance records while its investigation continued. But that came too late for many historical agreements. In a statement to the Guardian, the FCA said: 'If we decide to undertake a redress scheme, we will work with industry and other interested parties to ensure that it is as clear and straightforward as possible for customers to complain.' The Financing and Leasing Association (FLA), which represents major lenders including Lloyds, Santander UK and Close Brothers, has acknowledged the limitations of missing data. 'We have made clear to the FCA that consistent and fair outcomes cannot be delivered with patchy or absent data,' the FLA said. While the FCA has not yet confirmed whether a formal redress scheme will be introduced, a ruling in favour of borrowers by the Supreme Court would put pressure on the regulator to act. And if a scheme is mandated, firms will need robust documentation systems to avoid defaulting to redress. This may explain why Lloyds has already put aside more than £1.1 billion, regardless of its position that customers were not harmed. If the bank intends to prove that its loans were competitively priced, the ability to evidence that across thousands of legacy agreements will be critical — and expensive. As Rose argues, operational readiness will be key. 'There needs to be a standard table showing benchmark rates for similar loans and for similar customers,' he notes. 'Where the customer paid near the benchmark or below it, then it should be reasonable to assume there was no harm.' In the absence of such evidence, however, lenders will struggle to prove their case. Lloyds may not have admitted liability, but its financial provisions suggest it is preparing for a process where outcomes may hinge not on clear evidence of harm, but on the inability to demonstrate that harm did not occur. "Lloyds faces questions on 'no harm' claims amid mounting provisions" was originally created and published by Motor Finance Online, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Yahoo
22-05-2025
- Automotive
- Yahoo
Lloyds CEO defends motor finance conduct before MPs
Lloyds Banking Group's chief executive Charlie Nunn has defended the bank's conduct in the car finance market, telling MPs there is 'no evidence of harm' to customers as the sector awaits a critical Supreme Court ruling on the legality of historical commission arrangements. Speaking to the Treasury Select Committee this week, Nunn addressed the lender's exposure to the motor finance market amid a wave of consumer complaints and legal scrutiny. The issue centres on discretionary commission arrangements (DCAs), a practice where car dealers were incentivised by lenders to set higher interest rates in exchange for higher commissions, often without the consumer's knowledge. This embedded content is not available in your region. If the Court upholds an earlier decision by the Court of Appeal that a failure to disclose a commission was in breach of the Consumer Credit Act 1974, the Financial Conduct Authority (FCA) has committed to launching a formal redress scheme within six weeks. In a statement released in January, the FCA said it was monitoring complaint volumes and would intervene 'if firms fail to meet expectations'. Several lenders, including Lloyds, challenged the decision and the case was heard at the Supreme Court in early April. A ruling is expected in July. 'We don't have evidence of harm, or that we've broken regulation,' Nunn was reported in the finance press as saying. 'The Court of Appeal seems to be at odds with 30 years of legislation.' He warned that a lack of clarity from the Supreme Court could 'create dysfunction in the market'. Lloyds has set aside £1.2bn to cover potential liabilities — by far the largest provision in the sector. Barclays, which exited the motor finance market in 2019, has reserved £90m, according to its latest earnings report. The bank's UK chief executive Vim Maru told the Committee that Barclays has seen a surge in historical complaints, some dating back over 20 years, and has deployed 'a few hundred staff' to manage claims. Close Brothers Group is among the most exposed to potential remediation costs, with motor finance accounting for 22% of its gross loans as of end-2021, according to Fitch Ratings. Investec Bank Plc held a more moderate 4% of gross loans in the sector over the same period. Fitch has highlighted that exposure to misconduct-related risks and associated redress liabilities could affect earnings profiles and influence its credit ratings of UK banks. FCA's motor finance probe sparks misconduct risk concerns in UK banking sector: Fitch Ratings Analysts at RBC Capital have projected that total compensation payouts across the industry could reach as high as £32bn in a worst-case scenario. In their base case, total liabilities are forecast at £5.9bn, rising to £10.8bn in a more adverse outcome. If the Supreme Court upholds the Court of Appeal's decision, Lloyds could face an additional £4.6bn in costs under RBC's most severe scenario. Despite the growing provisions, Nunn told MPs there had been 'no material changes in consumer behaviour' and that the final cost exposure would depend heavily on 'the specifics of the decision'. The FCA first banned discretionary commission models in 2021, citing concerns that the practice created conflicts of interest and led to poor outcomes for consumers. The current litigation focuses on past sales practices before the ban was implemented. "Lloyds CEO defends motor finance conduct before MPs" was originally created and published by Motor Finance Online, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Herald Scotland
01-05-2025
- Business
- The Herald Scotland
Lloyds sees profits dip as bad debt provisions jump
It set aside £309 million for impairment charges, up from £57 million a year ago, including £100 million for potential borrower defaults as the tariff hikes unveiled by US President Donald Trump have led to worries over the worldwide economic outlook. The group said: 'Initial non-UK tariffs announced in the first few days of April and the immediate market response were larger than expected.' But on its forecast for the UK outlook, it said it is predicting a 'slow expansion in gross domestic product and a modest rise in the unemployment rate alongside small gains in residential and commercial property prices'. 'Inflationary pressures remain persistent, but gradual cuts in UK Bank Rate are expected to continue during 2025,' it added. The group stuck by its guidance for full-year results in the face of 'recent market volatility and economic uncertainty'. Charlie Nunn, group chief executive of Lloyds, said: 'In the first quarter of 2025, the group delivered sustained strength in financial performance. 'We remain confident in the outlook for Lloyds Banking Group and in our 2025 and 2026 guidance.' Chief financial officer William Chalmers said the bank had limited exposure to the US and tariff impacts, but that it does provide some lending to exporters to the US, albeit less than 1% of its lending balance sheet. He added there 'may be some dampening on corporate activity going forwards' from the trade war. Concerns over a global slowdown have also seen rate cut expectations increase. The group's first-quarter results showed a lending boom as borrowers sought to complete on house purchases ahead of the stamp duty change from the beginning of April. Mortgage lending grew by £4.8 billion as it saw 19,000 completions in the first three months of the year, with customers racing to beat the stamp duty deadline. It said March 27 was its biggest ever single day for completions, with nearly 5,000 on that day alone. The group did not book any further provisions for the motor finance scandal. Lloyds has previously put by more than £1 billion to cover the costs of potential mis-selling of car loans with hidden commission payments. The industry is now waiting for a Supreme Court decision on the case.
The Independent
01-05-2025
- Business
- The Independent
Lloyds sees profits dip as bad debt provisions jump
Lending giant Lloyds Banking Group has reported a fall in profits as it set aside more money for bad debts amid economic uncertainty due to the global trade tariff war. The group reported pre-tax profits of £1.52 billion for the three months to the end of March, down 7% on the £1.63 billion reported a year ago. It set aside £309 million for impairment charges, up from £57 million a year ago, including £100 million for potential borrower defaults as the tariff hikes unveiled by US President Donald Trump have led to worries over the worldwide economic outlook. The group said: 'Initial non-UK tariffs announced in the first few days of April and the immediate market response were larger than expected.' But on its forecast for the UK outlook, it said it is predicting a 'slow expansion in gross domestic product and a modest rise in the unemployment rate alongside small gains in residential and commercial property prices'. 'Inflationary pressures remain persistent, but gradual cuts in UK Bank Rate are expected to continue during 2025,' it added. The group stuck by its guidance for full-year results in the face of 'recent market volatility and economic uncertainty'. Charlie Nunn, group chief executive of Lloyds, said: 'In the first quarter of 2025, the group delivered sustained strength in financial performance. 'We remain confident in the outlook for Lloyds Banking Group and in our 2025 and 2026 guidance.'
Yahoo
01-05-2025
- Business
- Yahoo
Lloyds sees profits dip as bad debt provisions jump
Lending giant Lloyds Banking Group has reported a fall in profits as it set aside more money for bad debts amid economic uncertainty due to the global trade tariff war. The group reported pre-tax profits of £1.52 billion for the three months to the end of March, down 7% on the £1.63 billion reported a year ago. It set aside £309 million for impairment charges, up from £57 million a year ago, including £100 million for potential borrower defaults as the tariff hikes unveiled by US President Donald Trump have led to worries over the worldwide economic outlook. The group said: 'Initial non-UK tariffs announced in the first few days of April and the immediate market response were larger than expected.' But on its forecast for the UK outlook, it said it is predicting a 'slow expansion in gross domestic product and a modest rise in the unemployment rate alongside small gains in residential and commercial property prices'. 'Inflationary pressures remain persistent, but gradual cuts in UK Bank Rate are expected to continue during 2025,' it added. The group stuck by its guidance for full-year results in the face of 'recent market volatility and economic uncertainty'. Charlie Nunn, group chief executive of Lloyds, said: 'In the first quarter of 2025, the group delivered sustained strength in financial performance. 'We remain confident in the outlook for Lloyds Banking Group and in our 2025 and 2026 guidance.'
