BMW’s UK motor finance division has sharply increased the money set aside to cover potential compensation for drivers mis-sold car loans, allocating nearly £207 million in provisions.
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.
The FCA estimates that lenders could face total liabilities of between £9 billion and £18 billion, drawing comparisons with the £50 billion payment protection insurance (PPI) scandal. Banks including Lloyds and Santander UK, along with the finance arms of major carmakers, are preparing for significant hits to their balance sheets.
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.
A BMW spokesperson declined to comment beyond the accounts.