Renault’s British motor finance unit, RCI Financial Services, reported its first annual pre-tax loss in 26 years, driven by rising compensation costs related to a widespread mis-selling scandal involving car loans. The Rickmansworth-based lender posted a pre-tax loss of £110.4 million for the year ending 2024, largely due to a £150 million increase in provisions set aside to cover potential redress payments in the ongoing industry-wide controversy.

The total provision for compensation now stands at £219.2 million, although the company noted this remains a “best estimate” and actual costs may vary. This marks a significant financial setback for the subsidiary, which last recorded a loss in 1999, the same year Renault acquired the business from Nissan following their alliance agreement.

RCI Financial Services, which provides motor finance not only for Renault but also Nissan vehicles, has seen its profits shrink sharply amid the fallout. Pre-tax earnings for 2024 dropped to £8.7 million after the company recorded a £73.6 million provision related to the scandal earlier in the year.

The controversy centers on the commissions paid by lenders to car dealerships for arranging financing. An investigation by the UK’s Financial Conduct Authority (FCA) found that between 2007 and 2024, many motor finance deals were unfair to consumers, primarily due to poor disclosure of commission arrangements. The FCA has since proposed a compensation scheme estimated to cover 12.1 million finance agreements, with anticipated payouts totaling £7.5 billion and additional administrative costs of £1.6 billion.

Several major companies potentially affected by the scheme, including Volkswagen, Mercedes-Benz, and Crédit Agricole, are contesting the FCA’s plan in court, resulting in delays. A consumer group has also launched a legal challenge, arguing that the proposed compensation might shortchange affected customers. The FCA has warned that abandoning the current compensation framework could lead to a surge in consumer complaints and increase industry costs by approximately £6 billion.

Other lenders facing significant provisions include Lloyds Banking Group, which has set aside nearly £2 billion, Barclays with £430 million, and Close Brothers at £320 million.

An RCI spokesperson stated, “We continue to monitor developments closely and remain committed to supporting regulatory requirements and delivering fair customer outcomes,” underscoring the company’s intent to navigate the ongoing regulatory and financial challenges.