The Financial Conduct Authority in Britain has stated that car loan financing companies need to start preparing to bear additional operational costs due to a process being conducted by the authority to review the offers made by these companies.

Bloomberg News reported that the regulatory authority is reviewing the commissions charged by these companies on the loans they provide since last January.

It mentioned that "all companies must prepare to bear any additional operational costs due to the increase in complaints, and to bear the cost for resolving these complaints if applicable."

The Lloyds Banking Group, the largest provider of car loans in Britain, has allocated £450 million ($563 million) to pay for potential compensations and any other costs associated with the ongoing review, while the Close Brothers Group, which allocates 20% of its loans to finance car purchases, stated that it will not pay any dividends for the 2024 financial year as it seeks to strengthen its budget amidst the ongoing review.

Analysts say that the review being conducted by the British Financial Conduct Authority may result in costs amounting to several billion pounds, as the authority looks into what is called "estimated commission arrangements," a practice that the authority banned in 2021, as it drives car dealers to increase the borrowing costs borne by the customer.

The Financial Conduct Authority mentioned in a letter today, Friday: "It has been observed that companies are adopting different methods to address the potential impacts on their financial resources through the application of estimated commission arrangements, which may result in violations of existing laws and regulations."

The authority added, "Therefore, we have sent a letter to remind companies of the necessity to maintain sufficient financial resources at all times."