BMO to shutter indirect retail auto finance business as bad debt mounts

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MONTREAL — BMO Financial Group plans to close its indirect retail auto finance business in order to reroute resources, as borrowers dig deep to stay on top of recent interest rate hikes.

The decision will also trigger an unspecified number of layoffs in Canada and the U.S., the Bank of Montreal said.

Those dents on the income statement hint at the financial strain facing consumers, who have struggled to cope with a spike in interest rates over the past year and a half. The Bank of Montreal's indirect retail auto loans segment works with car dealerships to arrange financing for car buyers, who in turn make monthly payments to the lender — the bank. BMO's commercial banking business, which backs auto dealers through inventory financing, is unrelated to the upcoming shutdown.

The end of the dealer agreement took effect Sept. 15, with the bank still planning to fund contracts approved before that date.

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