Ford’s UK-based motor finance subsidiary, FCE Bank, has made a £61 million provision to cover possible compensation linked to the car loans mis-selling scandal. The charge, disclosed in the bank’s latest financial statements, positions Ford among several major lenders preparing for regulatory action and customer redress.
The provision reflects the anticipated financial outflow in the event of an industry-wide compensation scheme imposed by the Financial Conduct Authority (FCA).
FCE Bank, headquartered in Essex, stated there is “significant uncertainty as to the extent of customer loss and the terms of any potential redress scheme”.
FCE Bank provides vehicle financing for Ford customers across the UK, Italy, France and Spain, serving approximately 436,000 retail clients. At the end of December, it reported net loans and advances totalling £12 billion.
Ford joins lenders such as Lloyds Banking Group and Santander UK, which have set aside £1.15 billion and £295 million respectively. Other affected institutions include Close Brothers, with a £165 million provision.
https://datawrapper.dwcdn.net/DMjs8/1/
Analysts at HSBC estimate the sector could face liabilities of up to £44 billion, while credit rating agency Moody’s has projected a potential £30 billion impact under a worst-case scenario.
The scandal centres on commission arrangements paid by lenders to dealers and brokers who arranged vehicle finance. The FCA banned so-called discretionary commission models in 2021, arguing they incentivised higher borrowing costs and were unfair to consumers. However, a Court of Appeal ruling last October extended the scope of the controversy, finding that any undisclosed commission could be considered unlawful.
That judgment is now under review by the Supreme Court, which held a three-day hearing earlier this month. The FCA is awaiting the ruling before determining whether to introduce a mandatory redress scheme across the industry.
FCE Bank stated that it ceased using discretionary commission models in 2018 but acknowledged ongoing legal and regulatory uncertainty surrounding broader commission arrangements.
“Ford’s UK motor finance arm sets aside £61m” was originally created and published by Motor Finance Online, a GlobalData owned brand.
The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
