Bank of Ireland has more than doubled the amount set aside to compensate customers affected by a UK motor finance mis-selling scandal, increasing its provision from £143 million (€167 million) to around £350 million (€400 million).
The revision follows the UK Financial Conduct Authority’s (FCA) consultation paper published on October 7, which outlined proposed industry-wide redress measures related to commission arrangements between car dealers and lenders. These commission models, now under scrutiny, allegedly led to some customers being overcharged for car finance.
In a statement on Monday, the bank said its earlier provision — calculated at the end of June — was based on probability-weighted scenarios that reflected its best estimate of potential redress, compensation, and associated costs. However, it now expects significantly higher costs based on the FCA’s latest proposals.
“The estimated increase is due to the increased likelihood of a higher number of eligible cases, the construct of the proposed redress methodology, and the customer engagement approach,” the lender said.
The bank added that the provision will be updated as part of its full-year 2025 financial reporting process once the FCA finalises its redress scheme. “The final cost to the Group could change depending on the outcome of the consultation, actual customer opt-in rates, and any further legal, regulatory, or industry developments,” it noted.
Industry-Wide Fallout
The scandal has become one of the most expensive consumer finance issues in the UK, with multiple lenders facing large compensation payouts. Earlier this month, Lloyds Banking Group announced it would take an additional £800 million charge, bringing its total provision to £1.95 billion.
While the Bank of Ireland said it remains committed to ensuring fair treatment for affected customers, it also criticised elements of the FCA’s proposed redress model. The lender argued that the regulator’s methodology “does not reflect the actual loss to customers or achieve a proportionate outcome.”
The bank also said the FCA’s approach “does not align with the legal clarity provided by the recent UK Supreme Court judgment,” and confirmed that it would engage with the regulator on this basis.
Despite the increased financial provision, Bank of Ireland shares rose in Dublin trading on Monday, suggesting investors had anticipated the adjustment or viewed it as a step toward resolving the issue.
The FCA’s consultation remains ongoing, and final decisions on the scope and structure of the compensation scheme are expected in early 2026.
