Secure Trust Bank, Bank of Ireland up motor finance provisions

Secure Trust Bank and the Bank of Ireland have added themselves to a growing list of businesses upping their provisions ahead of a flurry of claims expected in connection with the motor finance scandal.

Following the publication of the UK finance watchdog’s review into the saga, Secure Trust Bank said it had more than tripled the money it had set aside for a redress scheme to £21m, while the Bank of Ireland doubled its own provision to £350m.

The decisions follow a similar move by Big Four bank Lloyds last week, in which it upped its provision by an extra £800m to a total of £2bn, while Close Brothers upped its own provision by around 80 per cent to £300m.

Secure Trust Bank shares fell by 4.5 per cent to 844p on Monday morning following the announcement. The stock is down by more than a fifth over the past month. Bank of Ireland shares were largely unchanged.

Lloyds boss: No evidence of harm in motor finance

The UK’s top Court sided with lenders on two out of three cases relating to the car-misselling saga, but upheld the case of one claimant under the grounds their 55 per cent commission was “unfair.”

However, the Financial Conduct Authority (FCA) has said the threshold for its redress – where 14.2m agreements are estimated to be eligible – will be 35 per cent.

Analysts have raised concerns about the “forensic” level of governance expected of lenders throughout the scheme as they attempt to prove their deals were not “unfair”.

The City had feared an eye-watering bill of up to £44bn if the Supreme Court upheld the entirety of the Court of Appeal’s October 2024 ruling. This spiked fears of a total collapse in the car financing market, making consumers unable to obtain critical, necessary loans.

The Justices were tasked with reviewing the judgment that found it unlawful for banks to pay commissions to car dealers without obtaining the customer’s informed consent.

Lloyds’ boss Charlie Nunn slammed the October ruling during a session with the Treasury Committee in May, stating it was “at odds with 30 years of legislation”

In a separate session with the Committee last month, Nikhil Rathi, chief executive of the FCA, said there had been a “range of cooperation” across lenders and claim management firms.

Rathi refused to name firms when pressed by MPs but said: “I think you can see firms in the public domain that have raised questions about any redress scheme we put in place.”