BANK OF IRELAND has more than doubled its estimate for the cost of compensating customers who were mis-sold UK car loans.

It followed the publication of the UK’s Financial Conduct Authority’s (FCA) consultation paper on its redress scheme over the scandal.

The FCA said people who fell victim to motor finance mis-selling could be eligible for around £700 (€805) in compensation on average.

The vast majority of new cars, and many second-hand ones, are bought with finance agreements, with customers paying an initial deposit to secure the vehicle, then a monthly fee with interest.

In 2021, the FCA banned deals where car dealers received commission from lenders, based on the interest rate charged to the customer.

The FCA said this provided an incentive for a buyer to be charged a higher-than-necessary interest rate, leaving them paying too much.

Bank of Ireland had previously set aside some €167 million in compensation that may have been payable to impacted customers, along with associated costs.

However, following the publication of the FCA’s consultation paper, Bank of Ireland now estimates this could increase to around €400 million.

It said this is due to the increased likelihood of a higher number of eligible cases, the proposed redress methodology and the customer engagement approach.

The final cost could change depending on the outcome of the consultation, customer opt-in rates and any further developments.

A spokesperson said Bank of Ireland is “committed to achieving a fair outcome for customers and ensuring appropriate redress is provided where loss has occurred”.

However, they added that Bank of Ireland “does not believe that the FCA’s proposed redress methodology reflects the actual loss to customers or achieves a proportionate outcome”.