Bank of Ireland revises motor finance redress costs to £350m

The Bank of Ireland Group has revised its financial provision for compensating customers affected by motor finance agreements to approximately £350m ($469.6).

This revision is in response to the Financial Conduct Authority's (FCA) proposed industry-wide compensation scheme on the UK motor finance commissions.

The problem arises from how commissions were paid to motor dealers, which prompted the use of higher interest rates on motor finance agreements.

According to data, the commissions were not clearly disclosed to consumers when they signed the finance contracts.

This adjustment reflects an increase from the previous estimate of £143m.

It was based on weighted scenarios and estimated costs related to the FCA redress scheme and potential legal proceedings.

The FCA's current proposals remain under consultation and are subject to changes.

However, based on these proposals, the group now believes that the provision might increase significantly due to a higher number of eligible cases, the design of the redress methodology, and the customer engagement strategy.

The group will incorporate any revisions into its financial reporting for the fiscal year ending in 2025, reflecting the final scheme and any additional relevant information.

The ultimate financial impact could vary, depending on the consultation's results, customer participation rates, and any further legal or regulatory changes.

An increase in the provision to £350m would impact the group's CET1 ratio, reducing it by about 35 basis points from 16.0% as of 30 June 2025.

In a statement, the bank commented: “The group is committed to achieving a fair outcome for customers and ensuring that appropriate redress is provided where loss has occurred.

“However, the group does not believe that the FCA’s proposed redress methodology reflects the actual loss to customers or achieves a proportionate outcome.”

Recently, Lloyds Banking Group responded to the car finance mis-selling issue, allocating an extra £800m to its existing £1.15bn provision.

The total provision of £1.95bn now includes both compensation and operational expenses, which Lloyds states is its current best estimate of the potential financial impact.

"Bank of Ireland revises motor finance redress costs to £350m" was originally created and published by Motor Finance Online, a GlobalData owned brand.

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