BMW Financial Services allocates £200m for car finance claims

BMW Financial Services’ UK business  has significantly increased its provision for compensation claims relating to historic motor finance commission cases according to the latest set of annual accounts, which show a total of £206.9 million has been set aside, up from £70 million at the start of 2024.

In its financial report for the year ended 31 December 2024, BMW Financial Services said it had received a number of complaints in respect of its historical use of discretionary commission arrangements (DCAs), some of which are with the Financial Ombudsman Service (FOS).

The auto finance lender stated it believed that “in the vast majority of cases, it was compliant with the regulatory requirements in place at the time”. However, it cited the Financial Conduct Authority’s review of DCAs, announced in January 2024, along with the subsequent legal cases, as the reason for earmarking £200 million for potential compensation payments.

The financial statements were drawn up before the Supreme Court hearing this summer and the announcement of the FCA’s proposals for an industry-wide redress scheme. BMW Financial Services said the outcome was “highly uncertain”, but it had calculated its provision based on the cost of making redress payments, related administration costs and costs associated with litigation activity.

An increase of 5% in the payout rate would result in an increase of £31 million in the provision, the lender said.

The FCA is due to publish details of its proposals for a redress scheme in early October. Earlier this month Stellantis Financial Services UK said it had set aside £37 million to meet claims, while previously, Lloyds Banking Group has revealed a £1.15 billion provision, Close Brothers has allocated £165 million, and Santander UK £295 million.