Close Brothers flags $430M motor hit

Close Brothers just put a new price tag on Britain’s car-loan cleanup: about £320 million, or roughly $430 million, tied to the Financial Conduct Authority’s final motor-finance redress scheme published on March 30, 2026. The lender said the hit is “broadly similar” to what it had already reserved and can be absorbed with existing capital. (closebrothers.com) That figure matters because it turns a long-running legal and regulatory fight into a concrete bill. Close Brothers said the estimate covers about 720,000 loans, including roughly 640,000 written under discretionary commission arrangements and another 80,000 non-discretionary cases that may still qualify under the regulator’s rules. (closebrothers.com) Motor finance is the loan that sits between a buyer and a car dealer when someone drives away before paying the full price upfront. The dealer arranges the credit, the lender provides the money, and the customer repays in monthly installments that can stretch for years. (fca.org.uk) The problem was how some commissions were built into that chain. In many cases, dealers could earn more if the customer paid a higher interest rate, which meant the person choosing the loan had an incentive to make the loan more expensive. (fca.org.uk) That commission model became one of Britain’s biggest consumer-finance scandals because it touched millions of car purchases over more than a decade. Reuters reported on March 30, 2026 that the Financial Conduct Authority expects the industry-wide compensation bill to reach about £9.1 billion, or roughly $12 billion. (reuters.com) The legal backdrop shifted several times before the bill landed on lenders’ desks. In August 2025, Close Brothers said the United Kingdom Supreme Court overturned the Court of Appeal ruling against it in the Hopcraft case and dismissed the Hopcrafts’ claims entirely, while still leaving room for some claims under the Consumer Credit Act in related litigation. (closebrothers.com) That Supreme Court win did not end the issue because the regulator kept building a separate compensation process. On March 30, 2026, the Financial Conduct Authority published Policy Statement 26/3, creating an industry-wide redress scheme for customers treated unfairly between 2007 and 2024. (fca.org.uk) Close Brothers’ new estimate gives a look inside how these costs are built. The bank assumed an average payout of about £500 per customer including compensatory interest, a 75 percent claim rate, and about £66 million of delivery costs to run the scheme. (closebrothers.com) The math is sensitive to small changes in customer behavior. Close Brothers said a 5 percentage point move in the assumed claim rate would change the estimate by about £18 million, which shows how quickly a compensation program can get more expensive if more borrowers file claims than expected. (closebrothers.com) This lands on a bank that was already under pressure. In its 2025 annual report, Close Brothers posted adjusted operating profit of £144.3 million but a statutory operating loss of £122.4 million, with motor-finance remediation and related costs playing a major role in the gap between the two numbers. (closebrothers.com) The company has also spent the past year simplifying itself to protect capital and steady the balance sheet. Its investor-relations timeline shows it completed the sale of Close Brothers Asset Management to Oaktree on March 3, 2025, and by March 17, 2026 it was telling investors it remained focused on execution and capital strength. (closebrothers.com 1) (closebrothers.com 2) So the $430 million headline is not just a one-off charge on old car loans. It is a sign that in auto lending, the old formula of writing loans, earning margin, and relying on stable repayment behavior is being squeezed at the same time by regulation, litigation, funding costs, and the operational burden of fixing past deals. (closebrothers.com) (fca.org.uk) For Close Brothers, the immediate message is that the bill looks survivable. The harder question is what motor finance looks like after lenders reprice risk, tighten dealer relationships, and absorb a scandal large enough for the regulator to design a market-wide compensation machine around it. (closebrothers.com) (reuters.com)