The Bank of Ireland announced on Monday that it has sharply increased its provision related to the UK motor finance commission scandal, setting aside £350 million (€403 million) to cover potential compensation costs, according to Reuters.
The figure represents more than double the £143 million previously earmarked by the bank. The increase follows the UK Financial Conduct Authority’s (FCA) announcement of a large-scale redress program for customers who were overcharged on car loans under commission-based arrangements.
Rising costs from industry-wide compensation
The FCA has estimated that the total cost of the compensation scheme across the industry could reach £11 billion, including around £2.8 billion in operational and implementation expenses. Based on the regulator’s calculations, affected consumers are expected to receive an average payout of roughly £700 per motor finance agreement.
Bank of Ireland controls about 2% of the UK motor finance market. This share implies a likely exposure of about £220 million, but the lender’s own revised estimate — now £350 million — suggests it expects higher participation rates or additional administrative costs as the program unfolds.
Regulatory pressure builds
The FCA’s probe has focused on the widespread use of discretionary commission models, where car dealers were incentivized to secure higher interest rates on loans in exchange for larger commissions. These practices, which were banned in 2021, allegedly caused customers to pay more than necessary for vehicle financing.
Bank of Ireland said the updated provision reflects its best current estimate of potential exposure, pending further clarity from regulators and final confirmation of compensation mechanics.
According to Reuters, the FCA continues to engage with major lenders to finalize the structure and timeline of the redress program, which could take several years to complete. The move highlights the deepening financial impact of the scandal on UK lenders, several of which are expected to raise their own provisions in the months ahead.