A soaring compensation bill for mis-sold car loans has pushed the British motor finance arm of Renault to its first annual loss in 26 years.
Accounts filed at Companies House by the Rickmansworth-based business show it fell £110.4 million into the red on a pre-tax basis last year after setting aside an extra £150 million to cover its possible redress costs from the industry-wide scandal.
The increase took the company's overall provision for the affair to £219.2 million, although it cautioned that this was a "best estimate [and] the ultimate cost of redress may differ from the amount provided."
The jump in its potential compensation bill meant the business recorded its first annual pre-tax loss since 1999 - the same year that Renault of France took ownership of the British lender from Nissan of Japan after the two carmakers agreed their longstanding alliance, which continues to this day. Nissan's in-house UK motor finance business had only started trading in 1998.
The accounts for the Renault subsidiary, which is called RCI Financial Services and also offers finance on Nissan vehicles, shed further light on the fallout from the mis-selling controversy, which is expected to cost banks and the lending arms of the auto manufacturers billions of pounds. RCI's pre-tax profits had already shrunk to £8.7 million in 2024 after it booked a £73.6 million provision for the car loans affair.
At issue are the commissions that lenders pay to motor dealers for arranging finance for car purchases. A wide-ranging investigation by the Financial Conduct Authority concluded last year that many motor finance deals between 2007 and 2024 had been unfair and that commissions had been poorly disclosed to consumers.
The scandal centres on discretionary commission arrangements, under which dealers could increase the interest rate offered to customers in order to boost their own commission - without the customer ever knowing. The FCA's findings have opened the door to a wave of compensation claims that could rival the PPI scandal in scale.
For RCI, the provisions represent a dramatic reversal for a business that had been reliably profitable for more than a quarter of a century. The company's warning that the "ultimate cost of redress may differ" from its £219.2 million estimate leaves open the possibility of further hits.
The wider industry faces a reckoning: with the FCA's redress scheme expected to cover millions of motor finance agreements sold over nearly two decades, the total bill for lenders could run into the tens of billions, reshaping the economics of car finance in Britain for years to come.