Close Brothers, Barclays, Lloyds and Santander, among others, are affected by the motor finance mis-selling affair. The UK regulator has set out its redress figures, cutting the total amount from where it was in an earlier part of its consultation.

UK-listed Close Brothers, whose shares were hit earlier in March when a US-based short-seller group alleged it misrepresented the likely redress costs of mis-selling motor finance, gave no specific reaction when the UK regulator yesterday announced its redress scheme imposed on a raft of banks and finance firms.

The Financial Conduct Authority said it has revised its approach to how much firms should redress affected clients, cutting the total amount to around £7.5 billion from the £9.2 billion sum in its earlier consultation process. When administration fees are added, the total cost is £9.1 billion.

At the core of the issue were commissions paid by lenders to car dealerships when they offered loans to customers. The FCA and courts have said these were insufficiently disclosed to consumers and encouraged charging higher interest rates. 

Lloyds Banking Group, the UK’s biggest car finance provider through Black Horse, has set aside more than £2 billion to cover the redress cost. Other lenders affected include Barclays and Santander, as well as groups such as the UK motor finance arm of Mercedes-Benz.

Close Brothers’ fortunes have been particularly hit by the saga, leading it to spin off parts of its operations and bolster its capital reserve. Close Brothers has previously stated it disputes the FCA’s way of calculating the redress amount. Since the start of January this year, shares in the group have fallen about 32 per cent.

Responding to the FCA’s statement yesterday, Close Brothers said it is “assessing the potential redress scheme on the group. The group will update the market as and when appropriate.” 

Lloyds said today: "The details of the final scheme differ from the scheme as laid out in October 2025 and require careful analysis.  Accordingly, the group is assessing the implications and impact of the final rules. The group will update the market as and when appropriate."

Bank of Ireland said today: "The group is assessing the potential impact of the financial scheme and is committed to achieving a fair outcome for customers, ensuring appropriate redress is provided where loss has occurred. The group's cumulative provision in relation to UK motor finance commissions is €429 million ($492 million), as of December 2025, and the group continues to be highly capital generative."

Adjustment
“We have adjusted how compensation is calculated to better reflect greater loss between 2007 to 2014. We have also ensured that consumers are not put back in a better position than they would have been had they been treated fairly, so in around one in three cases compensation will be capped,” the FCA said in a statement. “We have also streamlined the scheme, so consumers are compensated quickly and it is cost effective for firms to deliver. Millions of consumers will be compensated this year, most of the rest by the end of 2027.”

“Today’s announcement gives lenders and the market greater clarity on how the motor finance redress scheme will be put into action,” Peter Rothwell, head of banking, KPMG UK, said. “With an initial start date of 30 June 2026, lenders must now unpick the detail and move quickly from planning to execution.”

The regulator examined compensation details for millions of drivers, concerning a total of 14 million motor finance deals.

“The FCA’s final motor finance redress scheme shows that it has meaningfully engaged with consultation feedback and recalibrated its approach where the evidence justified it,” Sushil Kuner, head of financial services regulation at Freeths, a law firm, said. “By tightening eligibility, raising certain commission thresholds and refining how loss is assessed, the FCA has moved towards a more proportionate and legally grounded framework.”

“This remains a complex and resource-intensive operational programme, but the FCA’s adjustments should materially reduce the risk of satellite litigation and allow firms to focus on execution, identifying affected customers, evidencing decisions, and delivering redress efficiently,” Kuner said.

Rachel Couter, head of UK contentious financial services at law firm Osborne Clarke, said the financial sector will be unhappy because the FCA's redress goes beyond what had been decided previously by the country's top court.

“The final scheme is likely to be met with real disappointment by the industry, as it appears to push well beyond what the Supreme Court decided. It sharply increases the risk of legal challenge, with many expected to argue that the FCA has overreached. Although the overall compensation bill has dropped from earlier proposals, the redress timetable looks tight for many lenders,” Couter said.