In a landmark case at the High Court, Lloyds Banking Group was accused of illegally “overcharging” car finance customers by hundreds of millions pounds.
The UK’s largest high street bank is accused of charging excessive interest rates on one million finance agreements between 2015 and 2021, along with rivals Santander Finance and MotoNovo. The High Court claims are estimated to be worth £1bn.
In exchange for higher commissions from lenders , car dealers and credit brokers are alleged to have sold finance with higher rates of interest. In 2021, the Financial Conduct Authority (FCA) banned these “discretionary” commission incentives after finding that buyers paid up to £1,100 more than they should have for a £10,000 four-year financing package.
Three of Britain’s largest motor finance providers face a lawsuit to recover money from drivers. Black Horse, Santander UK, and MotoNovo finance are all owned by Lloyds. Together they control 57pc in the UK car financing market.
Black Horse faces claims of approximately £624m due to its 35pc market share, while Santander UK could be owed £166m by customers and MotoNovo finance could owe £209m.
According to the claims, consumers were unaware that they had been charged higher rates of interest because of a network anti-competitive agreements made between car finance companies and dealers.
If the claim is successful, all drivers who purchased used cars with financing from any of these three providers between October 1, 2015 and January 27, 2021 will be eligible for compensation.
Doug Taylor, the consumer advocate and Labour councillor from north London who is leading this campaign, claimed that Black Horse and Santander had “taken advantage of their clients”.
He said: “Affected customers unknowingly paid more on their car loans due to the way these companies incentivised dealerships.”
With this legal action, “I am standing up for those people in the UK that have been affected financially by the actions of the companies. I seek justice and compensation.”
Many websites have appeared since the FCA uncovered the scandal to recruit potential claimants. However, this is the very first time that class actions are being launched on behalf all those who were affected.
Belinda Hollway of the law firm Scott + Scott said that collective proceedings are an opportunity “to hold large companies accountable on behalf consumers”.
The High Court’s Competition Appeal Tribunal will decide whether the claims can proceed.
Woodsford is an international litigation financing business that pays for the action.
Black Horse’s spokesman stated: “We are dedicated to providing customers with clear and transparent information, so that they can make informed choices about the products they select.
We have implemented new rules for 2021 that were created by the FCA following its review of the motor finance industry. We comply with all regulatory requirements relating to commission payments and disclosures to customers.
MotoNovo Finance’s spokesman stated: “We are aware that a legal action has been filed against us, and we are preparing a response.” While these legal proceedings continue, we won’t comment.
Santander UK spokesperson said: “We don’t comment on actual or possible claims against us.”