Lloyds scraps car loan commissions after court ruling

Lloyds Banking Group has scrapped commission payments across its £15bn motor finance arm after a legal judgment on car loan misselling, as industry and Treasury officials hold urgent talks amid fears of contagion across the wider financial sector.

- Kalyeena Makortoff

The move follows last week's court of appeal ruling that consumers could not have consented to loans that involved "secret" commission payments to brokers and car dealers.

The shock decision has already forced the likes of Close Brothers - which was a defendant in the case - to pause all new lending as it prepares to challenge the judgment in the supreme court.

Lloyds, the biggest motor finance provider among UK high street banks, has continued to issue new loans. But its chief financial officer, William Chalmers, told analysts the bank had had to "adapt quickly" to do so.

It involved immediately cancelling commission payouts to brokers from its Black Horse car finance division, which oversees loans worth £15bn.