Lloyds. Your rate was the dealer's tip.
Lloyds is paying 2 billion in compensation to car finance customers. For years dealers were paid a bonus for charging you more interest, and you never knew your interest rate was the dealer's tip.
THE GIST ON LLOYDS: "Your rate was the dealer's tip"
What did Lloyds do?
Lloyds owns Black Horse, the UK's biggest car finance company, used by almost every UK car dealer. Between 2007 and 2024, if you bought a car on finance in Britain, there's a good chance Black Horse funded it. That's up to 12 million agreements.
How did the scam work?
On every one of those deals, the dealer picked the interest rate, because they had a secret deal with the lender. The higher the rate they got you to sign, the bigger the commission they took home. The person you trusted to find you the best deal was paid to get you the worst.
It's called a discretionary commission arrangement. The FCA banned it in 2021.
How big are the numbers?
Enormous. 12 million agreements. £7.5 billion in compensation across the whole industry. The average payout is £830 per person. Lloyds alone is on the hook for £2 billion, possibly even four. It's the biggest consumer scandal since PPI.
Why didn't anyone spot it?
Everything was hidden in plain sight. The interest rate was on the paperwork, and so was Black Horse's name. The fact that your dealer chose your rate to boost their own bonus definitely wasn't.
And it worked, because by the time you're signing the finance, you've already bought the car in your head. You've pictured yourself driving it. You've told your partner. You've probably imagined the school run. That's the trick every big ticket sale runs on: let you fall for the thing first, and price comes afterwards. Maths loses to love every time.
Should car dealers earn commission on finance at all?
Your take. One tap, then see how everyone else voted.
Quick answers
What was a discretionary commission arrangement?
A secret deal where the dealer picked your interest rate and earned a bigger commission the higher it was. The FCA banned it in 2021.
How much is being paid out?
£7.5 billion across the industry, an average of £830 per person, with Lloyds on the hook for £2 billion, possibly four.
Why didn't buyers notice?
The rate was on the paperwork, but by then they had already fallen for the car.
See you on the next one.
What should the next one be? Suggest a topic for Huw to explain
The conversation
Comments
Nothing here yet. Start the conversation: Huw reads every comment before it is published.
