Skip to content

Bank of Ireland sets aside €172m for car finance compensation

John Campbell
BBC News NI economics and business editor
PA Media Bank of Ireland front of branch. The sign says Bank of Ireland in white over a dark wall. PA Media
Bank of Ireland provides car finance via its Northridge Finance business

Bank of Ireland has set aside €172m (£142m) to cover the likely cost of compensation for car finance mis-selling in the UK.

Across the car finance sector there are potentially millions of motorists in line for a pay out over "hidden" charges.

Last week Lloyds Banking Group nearly tripled the amount it is setting aside for compensation to £1.2bn.

It followed a Financial Conduct Authority (FCA) inquiry into car finance agreements.

In the UK the vast majority of new cars, and many second-hand ones, are bought with finance agreements.

About two million are sold this way each year, with customers paying an initial deposit, then a monthly fee with interest for the vehicle.

In a complicated, and long-running series of developments, many of these agreements have come under scrutiny.

In 2021, the FCA banned deals in which the car dealer received a commission from the lender, based on the interest rate charged to the customer.

It said this provided an incentive for a buyer to be charged a higher-than-necessary interest rate.

Since January, it has been considering whether compensation should be paid to people with these deals before 2021.

Bank of Ireland provides car finance via its Northridge Finance business.

It said it expects "further clarity on this matter in 2025".

It comes as the bank made a pre-tax profit of just under €1.9bn, down slightly compared to the 2023 profit of €1.94bn.

Bank of Ireland is one of the two biggest banks in the Republic of Ireland and also has a business in the UK which includes its branch network in Northern Ireland.

The UK division increased its underlying profit by 27% in 2024 from £239m to £303m.

The division has been reshaped in recent years with the bank targeting only more profitable lending opportunities, particularly in mortgages, while withdrawing from other business.

Myles O'Grady, Bank of Ireland's Group chief executive, said it was an overall strong performance in 2024 and the group has "momentum across our business lines".