Close Brothers Evaluates FCA's £7.5 Billion Car Finance Compensation Scheme
Financial services firm Close Brothers has announced it is assessing the potential implications of the Financial Conduct Authority's newly revealed compensation scheme for motorists affected by unfair car loans. The FCA has finalised plans for a £7.5 billion redress programme, which will provide payments to holders of approximately 12.1 million car finance deals across the United Kingdom.
Details of the Compensation Scheme
The regulator has confirmed that each eligible motorist will receive an average payout of £830, with all affected individuals expected to be contacted by the end of 2026. This substantial scheme aims to address widespread issues in the car finance market, where customers were often charged excessive interest rates or faced hidden fees.
Close Brothers, a London-listed company, had previously set aside a £300 million provision to cover redress payments to its affected customers. In a statement, the group indicated it would update the market as and when appropriate regarding further financial impacts or adjustments required.
Broader Context and Industry Response
The FCA's intervention follows a lengthy investigation into misconduct within the car finance sector, highlighting systemic failures in lending practices. Consumer advocates, including financial expert Martin Lewis, have outlined two primary methods for claiming compensation:
- Direct contact through the FCA's designated claims process
- Utilising third-party claims management companies, though caution is advised regarding fees
This scheme represents one of the largest consumer redress initiatives in recent UK financial history, underscoring the regulator's commitment to protecting motorists from predatory lending. Industry analysts predict that other lenders may follow Close Brothers in reassessing their provisions as the full scale of the compensation becomes clear.
