Close Brothers sets aside £165m for motor finance redress

Close Brothers Group has set out £165 million for the first half of 2025 for potential payouts related to motor finance commission.

The business said the fund has been set aside for potential operational and legal costs, as well as estimates for potential remediation for affected customers.

The firm said the estimated provision is based on “probability weighted scenarios using various assumptions”.

These include, for example, commission models, rates and time periods in scope of any regulatory redress scheme, as well as response and uphold rates.

There remains significant uncertainty as to the range of outcomes from the motor commissions appeals and the Financial Conduct Authority’s (FCA) ongoing review of motor commissions.

As a result, Close Brothers said the ultimate cost to the group “could be materially higher or lower than the estimated provision”.

In a statement Close Brothers said: “We have completed preparations for a significant risk transfer of assets in motor finance and continue to analyse any adjustments to the timing and structure of a potential transaction in light of the Court of Appeal judgment and our ongoing appeal to the Supreme Court.

“The group continues to evaluate a range of additional potential management actions to further optimise risk weighted assets, including potential risk transfer of other portfolios, a continuous review of our businesses and portfolios and other tactical actions.

“The group’s financial strength and ongoing organic capital generation, coupled with the benefits of management actions to build capital, leave us well placed to absorb the impact of the estimated provision.”

The story so far on developments in relation to motor commissions

On January 11 2024, the FCA announced a review into historical motor finance discretionary commission arrangements (DCAs).

This review was prompted by high numbers of complaints from customers across the market and followed the Financial Ombudsman Service’s (“FOS”) publication, also on January 11, 2024, of its first two decisions upholding customer complaints relating to DCAs against two other lenders in the market.

On October 25, 2024, the Court of Appeal published its judgment in respect of Hopcraft v Close Brothers Limited (“CBL”) upholding the motor commissions appeal brought against CBL.

This case, initially determined in CBL’s favour, was heard in early July 2024 alongside two other claims against another lender.

Close Brothers disagrees with the Court of Appeal's findings and, on December 11, 2024, obtained permission to appeal to the Supreme Court.

The other lender has also obtained permission to appeal and all cases will be heard at a hearing scheduled for April 1 to 3 this year.

A number of interested parties have applied to intervene in the motor commissions appeals, including HM Treasury, the FCA, the Finance & Leasing Association (FLA), the National Franchise Dealers Association (NFDA) and Consumer Voice Limited (represented by Courmacs Legal Ltd).

The Supreme Court has not yet made a decision with respect to these applications.

The FCA has confirmed that it aims to set out next steps regarding its DCA review in May 2025, taking into account the outcome of the judicial review of one of FOS’ January 2024 decisions (the judicial review was determined in December 2024, but the applicant has been granted permission to appeal that decision) and subject to the Supreme Court process in relation to the motor commissions appeals.