What Black Horse Customers Need to Know About the FCA Redress Scheme

Lloyds Banking Group, through its motor finance division Black Horse, is one of the largest lenders involved in the Financial Conduct Authority’s review of historic car finance commission arrangements.

If you arranged car finance through a dealership between 6 April 2007 and 1 November 2024, your agreement may fall within the scope of the FCA’s proposed industry-wide redress scheme.

This does not mean your agreement was mis-sold. It means the FCA is reviewing how commission structures operated across the market and whether customers were treated fairly.

The redress scheme is expected to launch in early 2026, subject to consultation and final FCA rules.

Understanding what happened, how Black Horse operated, and what the FCA is proposing can help you decide what to do next.

Why Black Horse Is Involved In The Car Finance Review

Black Horse is the motor finance arm of Lloyds Banking Group. For many years it has been one of the UK’s largest providers of dealership-arranged finance for used and new vehicles.

Like most lenders operating through car dealerships, Black Horse paid commission to dealers for introducing customers.

Commission itself is not unlawful. The issue arises from how some commission models were structured and whether customers were told clearly how they worked.

One structure used widely across the industry was known as a discretionary commission arrangement. This is often shortened to DCA.

Under this model, the lender set a minimum interest rate for the finance agreement. The dealer could then increase that rate within a permitted range. The more the rate increased, the more commission the dealer earned.

The FCA concluded that this created a conflict of interest. A dealer could benefit financially from charging you a higher interest rate, even if a lower rate may have been available.

Because of this risk, the FCA banned discretionary commission arrangements in January 2021.

The current review focuses on agreements made before that ban.

How Discretionary Commission Arrangements Worked In Practice

When you buy a car using PCP or HP finance, you usually deal with the dealership. The salesperson explains the monthly payments, deposit and interest rate. You sign the agreement at the dealership, even though the lender provides the finance.

Under a discretionary commission arrangement, the lender gave the dealer limited flexibility over the interest rate.

For example, if the lender’s minimum rate was 5%, the dealer might have been allowed to offer you 6% or 7% instead. The difference generated extra commission.

You may not have been told that:

• The dealer could adjust the rate
• The dealer’s commission increased if the rate increased
• A lower rate may have been available

The FCA found that this structure created systemic conflicts of interest across the market.

That does not automatically mean every Black Horse agreement was unfair. Some customers may have received competitive rates. Others may not have experienced financial detriment.

The redress scheme aims to assess that properly.

What The FCA Is Proposing

Rather than rely on individual complaints alone, the FCA has proposed a single, industry-wide redress scheme.

The scheme would cover certain motor finance agreements taken out between 6 April 2007 and 1 November 2024.

The FCA has indicated that millions of agreements across the market may fall within scope for review. However, not all will qualify for compensation.

The regulator’s goal is consistency. Instead of different approaches by different lenders, the FCA intends to set a standard method for assessing:

• Whether commission created unfair pricing
• Whether disclosure was sufficient
• Whether the customer suffered financial loss
• How redress should be calculated

Final rules are expected after consultation concludes in late 2025, with implementation anticipated in early 2026.

How Your Black Horse Car Finance Agreement May Have Been Mis-sold

You may fall within scope of the scheme if:

• You took out PCP or HP finance
• The agreement was arranged through a dealership or broker
• Black Horse provided the lending
• Commission formed part of the arrangement

Eligibility does not depend on whether you still own the vehicle. It also does not depend on whether you have already settled the finance.

You could still be within scope if:

• You paid the agreement off early
• You refinanced
• You no longer have the car
• The agreement ended years ago

What matters is how the agreement was structured at the time.

Not every Black Horse agreement involved discretionary commission. Even where commission existed, it may have been disclosed adequately. Some agreements may show no financial detriment when reviewed.

Each case will depend on its individual facts and the FCA’s final methodology.

What Compensation May Include

Where redress is due, it is expected to focus on financial loss rather than penalties or fines.

This could include:

• A refund of excess interest paid because of commission-linked rate setting
• Statutory interest, usually calculated at 8% simple per year on the overpayment
• Adjustments to any remaining balance on active agreements

Some industry commentary has suggested that redress in certain upheld complaints has averaged several hundred pounds per agreement.

However, actual amounts vary significantly. The size of your loan, the interest rate applied, the length of the agreement and how commission affects pricing all influence the calculation.

Some customers may receive no compensation if no overpayment is identified after review.

It is important not to assume entitlement. The FCA scheme is designed to assess financial impact, not to apply automatic refunds.

Lloyds Banking Group’s Financial Provision

Lloyds Banking Group has set aside substantial financial provisions in response to regulatory developments in motor finance.

A provision is an accounting measure. It reflects the bank’s estimate of potential exposure based on current information.

It does not confirm that any particular agreement was mis-sold. It also does not confirm the number of customers who will ultimately qualify for redress.

Banks are required to prepare for potential regulatory outcomes. Setting aside funds is part of that preparation.

Legal Developments Affecting The Market

Motor finance commission issues have led to legal proceedings involving several lenders.

Some cases have progressed through the High Court and Court of Appeal, with questions raised about disclosure, fiduciary duties and unfair relationships under consumer credit law.

Appeals have also reached the Supreme Court involving multiple lenders.

These cases may clarify aspects of the legal framework. However, the FCA has chosen to develop a broader redress scheme to ensure consistent outcomes across firms rather than relying solely on individual court judgments.

The legal landscape remains active. Final FCA rules will shape how compensation is assessed.

How The Redress Process Is Expected To Work

Once the FCA finalises the scheme, the process is expected to follow a standard structure.

You would raise a complaint directly with Black Horse. The lender would assess whether your agreement falls within the defined scope.

If it does, the lender would apply the FCA’s calculation methodology. Where redress is due, compensation would be offered.

Customers who have already complained may have their cases reviewed again once the current pause in complaint handling lifts.

The FCA expects the scheme to open in early 2026, subject to final confirmation.

Will Making A Complaint Affect Your Credit File?

Complaints about historic commission structures usually relate to pricing and disclosure rather than missed payments or affordability.

In most cases, raising this type of complaint does not affect your credit file.

However, individual circumstances differ. If your complaint involves wider issues, outcomes may vary.

What You Can Do Now

You can review any of your past car finance agreements with Mis-Sold Expert. We will check the type of agreement, how it was arranged through the dealer, and whether black horse provided the finance.

If you have copies of your finance agreements, settlement letters or payment schedules, keep them accessible.

If you do not have paperwork, lenders may still hold records.

Preparing this information now may make it easier to engage with the process once the FCA confirms final rules.

The Bigger Picture

The FCA’s motor finance review is one of the largest consumer finance investigations in recent years.

Black Horse, as one of the biggest lenders in the UK car finance market, is central to that review.

The outcome will affect how historic commission arrangements are assessed and how redress is calculated across the industry.

The key point is balance. Not every agreement was unfair. Not every customer will receive compensation. The purpose of the scheme is to apply a consistent method to determine whether financial loss occurred and, if so, how it should be addressed.

You can claim without using a claims management company; you can go to your finance provider and then to FOS, for free. Additionally, the FCA is introducing a free consumer redress scheme.