Motor finance: BMW sets aside over £200m for car mis-selling
BMW’s UK car finance arm has set aside over £200m to cover a potential hit from the motor finance scandal.
The firm joins a batch of British lenders and motor companies, which have been forced to prepare provisions with millions of drivers eligible for compensation.
In July, the Supreme Court handed City banks a lukewarm win after upholding the appeal of two lenders against claimants in the car mis-selling case.
But the door was left ajar for further claims after the top court ruled in favour of one claimant.
The Financial Conduct Authority has said it will introduce a industry wide redress scheme next year to compensate after a “large number of consumers” were not properly informed on the details of their deal.
Range of cooperation in motor finance cases
Speaking at the Treasury Select Committee, the financial watchdog said its consultation on the industry-wide redress programme will end in early October.
“We hope that compensation, where it is due, can start to be paid next year,” he added.
The FCA has estimated up to £950 in compensation per customer.
BMW Financial Services has set aside a provision of £206.9m to cover motor finance claims, according to new accounts filed with Companies House.
A year prior in 2023, the firm set aside £70.3m.
Banking giant Lloyds led the pack for the steepest provision at £1.2bn, whilst its peers Santander and Close Brothers set aside £295m and £165m.
BMW said there was still “considerable uncertainty” regarding the outcome of the FCA’s scheme as final figures could be “materially less or greater” than funds set aside.
In his hearing with the Treasury Committee, Nikhil Rathi, the boss of the FCA, said there had been a “range of co-operation” across lenders and claim management companies.
Despite being pressed to name uncooperative firms, Rathi said: “I think you can see firms in the public domain that have raised questions about any redress scheme we put in place”.
The regulator warned earlier this year a scheme must not drive firms out of businesses or force any to withdraw from the market.
“This could reduce competition and could make it more expensive for consumers to borrow money to buy a car in the future,” the watchdog said.