The British car loans division of BMW has been compelled to allocate more than £70 million to address potential customer compensation related to the mounting motor finance commission scandal. This provision from the German automotive giant brings the total reserves set aside by lenders to nearly £680 million, according to recent analysis.
The financial implications have intensified following a significant Court of Appeal judgement last month, which substantially broadened the scope of the industry’s challenges. Industry experts are drawing parallels to the £50 billion payment protection insurance compensation scandal, with city analysts projecting the final industry cost could reach billions of pounds.
BMW Financial Services GB Limited acknowledged “considerable uncertainty” regarding its ultimate liability in its latest Companies House filings. The accounts, notably finalised prior to the recent court ruling, reflect growing concerns across the automotive finance sector.
The regulatory spotlight has remained fixed on motor finance providers since 2020, when the Financial Conduct Authority implemented a ban on discretionary commission arrangements. The regulator’s January announcement of a comprehensive investigation into historic discretionary commissions dating back to April 2007 has sparked increased speculation about mandatory redress payments.
Major financial institutions have already taken defensive positions, with Lloyds Banking Group setting aside £450 million, Investec reserving £30 million, and FirstRand’s British car loans operation, MotoNovo, allocating £127.4 million. Several significant lenders, including Close Brothers and Santander UK, have yet to disclose their provisions.
The recent court ruling has extended concerns beyond discretionary commissions to encompass all “secret” or partially disclosed commissions, establishing more stringent disclosure requirements than previous regulations. This development has prompted numerous lenders, including BMW, to temporarily suspend their car loans operations whilst ensuring compliance with the new ruling.
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