Ford’s UK finance arm has significantly increased its provisions for the car finance mis-selling scandal, as lenders brace for a multibillion-pound compensation programme expected to reshape the industry.
Accounts filed by FCE Bank show the company has raised its provision for potential redress costs to £155 million, up from £61 million a year earlier. The increase reflects expectations around the forthcoming compensation framework being finalised by the Financial Conduct Authority, which is due to publish its final rules imminently.
The car finance controversy centres on commission structures used by lenders and dealers, where incentives were paid to brokers arranging loans without always being clearly disclosed to customers. Regulators have argued that these practices may have led to consumers paying more than they should have.
The FCA has estimated that its proposed redress scheme could require lenders to pay out around £8.2 billion in compensation, alongside an additional £2.8 billion in administrative costs. If implemented at that scale, the programme would rank among the largest financial compensation exercises since the payment protection insurance (PPI) scandal.
The regulator first began examining the motor finance market in 2017 and banned certain commission arrangements in 2021. However, a surge in complaints led to a broader investigation launched in 2024, culminating in the proposed industry-wide scheme announced last October.
Ford is one of several major players increasing provisions in anticipation of the final ruling. Lloyds Banking Group has set aside nearly £2 billion, the largest provision so far, while Close Brothers and other financial institutions have also warned of substantial exposure.
The financing arms of global carmakers, including Mercedes-Benz and BMW, are also expected to be affected, underlining the widespread reach of the issue across both banking and automotive sectors.
FCE Bank, which provides loans to around 410,000 retail customers across the UK and Europe, said its revised £155 million provision represents its “best estimate” of the likely financial outflow under the FCA’s proposals.
The FCA’s plans have sparked strong debate within the industry
Lenders have argued that the proposed compensation levels are excessive and do not fully reflect a recent Supreme Court ruling that was broadly favourable to finance providers in cases involving commission disclosure.
At the same time, consumer groups have called for tougher measures, arguing that affected borrowers should receive full redress for any unfair costs incurred.
The regulator has attempted to balance these competing pressures through a consultation process, but the final rules, expected after markets close, could still face legal challenges, potentially delaying the rollout of compensation payments.
The outcome of the FCA’s decision is likely to have far-reaching implications for the structure of the UK car finance market.
For lenders, the immediate focus will be managing the financial hit and processing claims efficiently. For regulators, the challenge will be restoring trust while ensuring that compensation is proportionate and enforceable.
For consumers, the scheme represents a potential opportunity for redress on a large scale, although the timing and scope of payments remain uncertain.
As the sector awaits the final ruling, Ford’s increased provision highlights the scale of the issue, and signals that lenders are preparing for a significant financial and operational impact in the months ahead.
