BMW Sets Aside Over £200m as Car Finance Mis-Selling Scandal Deepens
BMW has reserved more than £200 million to deal with possible payouts.
The UK’s car finance scandal has been making waves for some time, and now the Financial Conduct Authority (FCA) is putting the finishing touches on a redress programme to compensate affected drivers. As the regulator moves closer to action, big names in the industry are preparing their balance sheets, and BMW is the latest headline.
The company has confirmed it is reserving more than £200 million to deal with possible payouts, almost three times what it had previously set aside. It’s a striking figure, and one that shows just how serious this issue has become.
What the Scandal Is About
At the centre of it all are discretionary commission arrangements. These were deals where car dealers and brokers had the power to adjust the interest rate on a customer’s finance agreement. The catch? The higher the interest rate, the more commission they earned.
For drivers, it meant paying more than necessary, often without knowing why. In many cases, customers weren’t told that their interest rate was directly linked to the commission the dealer received.
The FCA recognised the harm and banned these practices in 2021. But that left a long trail of historic agreements between 2007 and 2020 that could now be challenged. With millions of loans potentially affected, the scale of the problem is vast.
BMW’s Big Announcement
BMW has now set aside £206.9 million to cover potential claims, up sharply from about £70 million last year. That’s a huge jump, and it reflects the uncertainty surrounding how many customers will make claims and how many of those claims will succeed.
The company has been clear: even small changes in assumptions could drive costs up quickly. If just five per cent more claims succeed than anticipated, that could add another £31 million to BMW’s bill. It’s a reminder of how unpredictable the final cost will be, not just for the German maker but for the whole industry.
Lloyds Banking Group, through its motor finance arm Black Horse Finance, has made by far the largest provision to date. The bank has reserved £1.15 billion for potential claims, including an extra £700 million it added in 2025.
Close Brothers has taken a more cautious but still substantial step, setting aside £165 million. Santander UK has also prepared itself for the fallout, with a provision of £295million. Even Barclays, which no longer writes new car finance deals, has recognised its historic exposure and has reserved £90 million.
The Regulator’s Response
The FCA hasn’t stood by quietly. It has taken firm steps to tackle the problem:
- Banning the practice: Since 2021, discretionary commissions have been outlawed.
- Investigating the past: The regulator has been digging into how these deals were sold and what consumers lost.
- Turning to the courts: A series of rulings have shaped the debate around disclosure and dealer responsibility. The most notable came from the Supreme Court, which clarified when commissions must be revealed and how far brokers’ duties to customers extend. While the judgment offered lenders some breathing room, it also reinforced the principle that customers must be treated fairly.
- Designing a way forward: In August 2025, the FCA announced plans for an industry-wide redress programme. A consultation is expected in October 2025, with compensation payments likely to start in 2026.
The regulator estimates the overall cost to the industry could range between £9 billion and £18 billion. It’s a massive figure, and one that shows the seriousness of what’s at stake.
What This Means for Drivers
If you took out credit for your vehicle between 2007 and 2020, you may be entitled to compensation. Check today whether you might be eligible for payment with our quick Car Finance Claim Eligibility Checker. It only takes a couple of minutes.
The average payout is expected to be around £950 per customer, though the exact amount will depend on your agreement.
Final Thoughts
BMW’s decision to reserve over £200 million is a strong signal of just how far-reaching the car finance scandal is. With the FCA preparing to launch one of the biggest consumer compensation programmes since PPI, both the industry and drivers are waiting to see how the process unfolds.
For consumers, it represents a chance to recover money unfairly lost. For the industry, it’s a costly lesson in why transparency matters. And for regulators, it’s another reminder that robust oversight is essential to protect customers and keep markets fair.
