6:07 am, October 1, 2025
Car loan provider Close Brothers has set aside a further £3m to cover compensation payments to customers, as it reports a £122.4m loss in 2024.
The lender published its delayed financial results this week after a year in which it took a series of emergency steps to bolster its finances by more than £400m.
These included selling its asset management division and withholding dividend payments to shareholders as it took steps to mitigate against the Financial Conduct Authority (FCA) wide-ranging inquiry into the car loans industry.
Car finance accounts for over a quarter of Close Brothers’ £9.5bn loan book at £2bn, leaving it exposed to substantial compensation payments following the conclusion of the FCA investigation into commissions paid by lenders to motor dealers for arranging car finance.
But the latest issue for the lender focuses on customers who repaid their car loans early, some of whom had overpaid their balance and were not reimbursed by the bank.
Close Brothers advised in February that it had set aside £165m to cover the cost of the commission compensations and left that sum unchanged in its projections, but warned: ‘the ultimate cost to the group could be materially higher or lower than the provision taken and remains subject to further clarity from the FCA on the scope and design of a redress scheme’.
The £33m overpayment compensation is completely separate to this and poses a further blow to the lender.
‘It’s effectively a lot of very small amounts going back some time,’ said Mike Morgan, Close Brothers CEO, adding that the issue was limited to its car loans division.
The company said that £33m was its ‘best estimate’ and that the provision ‘remains subject to refinement’. Morgan didn’t disclose how many customers were affected and conceded that Close Brothers had ‘really only got our arms around it in the last week’.
‘The most important thing is we’re on it,’ he said.
The FCA is due to set out details of its proposed commission compensation scheme later this month.
Morgan has also urged the City regulator to give the industry ‘finality’ over the car-finance affair, saying the controversy had ‘gone on for quite some time now’ and that he hoped the FCA’s plan for an industry-wide compensation scheme would draw a line under the problem.
‘What I think we need from a scheme is finality,’ he said. ‘We also need to understand what is the harm that redress should be paid for, that isn’t entirely clear.’
Claim payments are expected to begin next year and Nikhil Rathi, the FCA’s chief executive, has said he wants a ‘critical mass’ of the claims to have been dealt with by the end of next year – most people are likely to receive less than £950, it said.
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