Lloyds Banking Group (LSE: LLOY) Shares gained 3% early Wednesday (Oct. 8) as the next act in the car loan mis-seller drama unfolds.

The bank said “Notes the FCA’s recent announcement… on an industry redress scheme for motor finance. “

Lloyds is “Currently assessing the implications and impact… and will update the market as needed. “

Car loan substitute

A day earlier, the chief executive of the Financial Conduct Authority (FCA), Nikhil Rathi, said:Time their clients received fair compensation.”But it looks like there may be less than borrowers.

The FCA previously showed average compensation approaching £950 per customer. It now issues a sum of around £700.

But total industry payouts could still reach £8.2bn as the FCA suggests around 44% of engine finance deals since 2007 could qualify.

Perhaps unsurprisingly, the Finance and Leasing Association – which represents the lending industry – thinks this is too much. Director Adrian Dally told the BBC of the number of people lined up for the potential payout “It seems incredibly high“.

It’s not over yet

To answer my headline question, no, that’s not all.

But this is a key milestone that brings us closer to quantifying the damage. The removal of so much uncertainty must be a relief for shareholders. This for me – I still had a nagging fear that FCA might come down a lot harder than we expected.

The decision also establishes a time scale for the final veil. On various routes, depending on individual cases, car loan customers will have 12 months from the start of the program to make their claims. Therefore, it will take at least that long before the final cost is realized.

What’s next?

I doubt it would make any real difference to shareholders. Those who didn’t like the look of things and decided to sell have certainly already sold. And those of us who held on… well, I can only speak for myself, but recent events reinforce my decision.

What about those who are thinking about purchasing but are holding off until this thing happens?

For me it would be based on the same factors as always. This is the current valuation, dividend yield, forecasts and long-term future of the banking sector. First, banking is crucial to every aspect of contemporary life and business – and that is not going to change.

Valuation, valuation

Looking at the rest, the projected price-to-earnings (P/E) ratio of 12 for the current year looks a bit high. Analysts see it falling to 7.5 by 2027. And again, I would rate it as affordable. But a lot can happen from time to time, especially with an economy in such a impoverished state. And Lloyds is very exposed to where interest rates go.

The projected 4% dividend yield is nothing flashy. Forecasts show that it is growing, although this is far from guaranteed.

Overall, I would rate Lloyds shares as fair value right now. But with my long term specs I am considering a supplement.