By JOHN-PAUL FORD ROJAS, DEPUTY BUSINESS EDITOR
Bank shares climbed yesterday after the City watchdog scaled back the estimated cost of a car finance ‘rip-off’ compensation scheme from £11billion to £9billion.
Lloyds Banking Group rose 1.2 per cent, or 1.06p, to 92.34p, while Barclays added 1.2 per cent, or 4.55p, to 389.45p.
Smaller lender Close Brothers rose 5 per cent, or 19p, to 400.6p.
It came after the Financial Conduct Authority (FCA) said it would tighten eligibility for the compensation scheme, meaning consumers who were not left out of pocket would not need to receive redress.
The number expected to receive a payout has been cut from 14m to 12m.
However, the average sum for those in line for compensation has climbed from £695 to £829.
Compensation: Motorists are getting money back because of the way car dealers were given commissions by lenders to sell loans to customers, over a period from 2007 to 2024
Motorists are getting money back because of the way car dealers were given commissions by lenders to sell loans to customers over a period from 2007 to 2024.
In some cases, they received higher sums if they managed to sell pricier packages.
Russ Mould, investment director at AJ Bell, said: ‘The market reaction suggests this will be a mild shunt for [Lloyds] rather than anything more serious.’