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Banking giant Lloyds has set aside £450m to cover the potential costs of an investigation into car financing transactions by the UK financial regulator.
An investigation into whether people are paying too much for cars was launched last month by the Financial Conduct Authority (FCA).
Brokers who arranged car loans earned commissions based on the interest rates they set for their customers.
Lloyds disclosed the provision when it announced a significant increase in annual profits.
The bank said its pre-tax profits soared to £7.5bn last year, beating expectations and increasing by 57% on the previous year.
Last month, the FCA announced it would investigate whether people who believe their car loan charges are too high are liable for compensation.
Under so-called discretionary fee arrangements, some lenders allowed auto dealers to adjust interest rates on loans to improve the fees they received. In other words, the higher the interest rate, the higher the fees.
As a result, these deals created an incentive for brokers to increase the amount people charged on their car loans.
The FCA will ban these arrangements in 2021, saying it would save drivers overall £165m a year.
Some analysts claim that the total damages could reach billions of dollars.
Lloyds Banking Group is seen as the most exposed of the big banks because it owns Black Horse, one of the UK's biggest car finance providers.
Lloyds chief executive Charlie Nunn told the BBC's Today programme: “The extent of any fraud or loss, if any, on behalf of our customers remains unclear and we would like to provide clarity. “We welcome the FCA's announcement a few weeks ago that it will investigate this.” For our customers and our industry. ”
