BMW sets aside 200m for UK car finance mis-selling claims

"The move underscores the growing cost of the industry-wide scandal as regulators prepare a formal redress scheme. The Financial Conduct Authority (FCA) is expected to outline shortly how it will compensate millions of consumers caught up in the mis-selling of discretionary commission arrangements - deals that rewarded car dealers with higher commissions if customers paid higher interest rates on finance. The practice, banned in 2021, has been under investigation since January 2024."

"BMW's disclosure, made in accounts filed at Companies House, shows its provision has nearly trebled from the £70 million reported last year. The figures were signed off in April, before the FCA confirmed it would push ahead with forcing lenders to compensate affected consumers. In its annual report, BMW's UK finance arm admitted there was "considerable uncertainty" around the final scale of compensation. It warned that even a five per cent increase in claims could add a further £31 million to its provision, which also covers administrative and legal costs."

"Although a Supreme Court ruling in July largely sided with the industry over motor finance arrangements, the FCA has signalled that it will still enforce wide-ranging redress. Chief executive Nikhil Rathi has said he wants a "critical mass" of consumer complaints resolved by next year."

BMW's UK motor finance division increased provisions to nearly £207 million to cover potential compensation for customers affected by mis‑sold discretionary commission arrangements. The mis‑selling practice, banned in 2021, has been under investigation since January 2024 and could lead to substantial industry liabilities. The FCA estimates lenders could face between £9 billion and £18 billion in total liabilities, prompting banks and carmakers' finance arms to prepare for balance sheet impacts. BMW's provision has nearly trebled from £70 million and the company warns that small increases in claims would materially raise required reserves. The FCA intends wide-ranging redress despite a Supreme Court ruling that largely sided with the industry.

Read at Business Matters