BMW sets aside £207m for motor finance redress as FCA pressure mounts

(Sharecast News) - Car finance firm BMW Financial Services has set aside £206.9m to cover potential compensation linked to the UK motor finance mis-selling scandal, according to accounts filed at Companies House. The provision, up from £70.3m a year earlier, reflects mounting pressure on lenders ahead of a proposed redress scheme from the Financial Conduct Authority, which has been consulting on industry-wide compensation for consumers who may have been mis-sold car loans between 2007 and 2020, particularly under discretionary commission arrangements that incentivised dealers to charge higher interest rates - a practice that was banned in 2021.

BMW said the provision covers expected payouts, legal costs and administrative expenses, but warned of "considerable uncertainty" around the final scale of claims. A 5% increase in expected payouts could add a further £31m to the total, it noted. The FCA has estimated that total industry liabilities could reach between £9bn and £18bn, drawing comparisons with the payment protection insurance scandal.

BMW joins a growing list of lenders preparing for significant financial impact, including Lloyds Banking Group, Santander UK and Close Brothers.

Although a Supreme Court ruling in July largely favoured lenders, the FCA has signalled its intention to press ahead with compensation, with chief executive Nikhil Rathi telling MPs that he expects a "critical mass" of complaints to be resolved by 2026.

Reporting by Iain Gilbert at Sharecast.com