Lloyds warns of greater hit from car loan finance scandal

Banking group had set aside £1.2bn for compensation but ‘character’ of City regulator’s payout scheme could fuel bigger bill

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Lloyds Banking Group has warned it is likely to take a greater hit from the motor finance scandal than originally expected, costing more than the £1.2bn it had set aside.

The City regulator said on Tuesday night that people who were mis-sold car finance are likely to receive compensation payouts averaging £700 from 14m unfair loans, less than the £950 payouts previously expected.