BMW's UK car finance arm has earmarked more than £200 million to brace for the ongoing fallout from the motor loan mis-selling scandal. The German marque becomes the latest automotive giant to reveal the potential financial hit from the controversy, with millions of motorists expected to be in line for compensation payouts.
The Financial Conduct Authority (FCA) is currently consulting on an industry-wide compensation scheme for consumers who were short-changed when they secured car loans between 2007 and 2020. This follows the regulator's belief that numerous banks and motor finance companies breached regulations by failing to properly disclose commission payments to dealers, potentially denying customers fair interest rates.
The FCA announced earlier this month that it anticipates launching redress payments to affected customers next year. In BMW Financial Services' latest accounts lodged with Companies House, the firm revealed it had allocated a provision worth £206.9 million by the end of 2024 to cover historical motor commission claims.
This represents a significant jump from the £70.3 million provision set aside a year earlier. BMW acknowledged it has received a "number of complaints" relating to historical commission arrangements, with some cases currently under review by the Financial Ombudsman Service.
The firm revealed its provision covers compensation payments, administrative expenses and legal fees. BMW emphasised there remains "considerable uncertainty" about the final outcome of redress claims, noting these could still prove "materially less than or greater" than the current provision.
The company indicated that a mere 5% rise in potential payouts would necessitate boosting its provision by £31 million. The accounts received approval before a landmark Supreme Court ruling last month concerning the scandal, which partially favoured the industry and prevented a catastrophic outcome for motor finance companies.
The Press Association has approached BMW for comment.
