Close Brothers Reports £122m Loss Amid Car Finance Scandal
Close Brothers, a UK-based financial services group, has reported a significant loss of £122million for the year ending July 2022. This downturn follows a £133million profit in the previous year. The loss is partly due to a £33million provision related to a carmax finance issue, which is one of several challenges the lender is currently facing.
The car finance commission scandal has impacted multiple lenders, with potential compensation bills reaching up to £18billion. Close Brothers is among those affected, with a £33million provision set aside for this issue. This provision is in addition to a £165million sum already set aside for a separate carmax lending problem. The issue revolves around whether commissions paid to car dealers led motorists to pay excessive loan fees.
The lender's chief executive, Mike Morgan, confirmed that the issue was identified by Close Brothers' own staff. Other corporations under investigation by the Financial Conduct Authority (FCA) for carmax finance sales between 2007 and 2021 include Volkswagen Financial Services, Ford Credit, and Santander Consumer Finance.
In response to these challenges, Close Brothers is restructuring its operations. It is shedding underperforming businesses and winding down its vehicle hire operation, resulting in a £30million writedown. The lender expects to contact affected customers in early 2026 to address the £33million hit due to 'historical deficiencies' in handling car loan customers.
Close Brothers' £122million loss reflects the significant challenges it is currently facing, particularly in the carmax finance sector. The lender is taking steps to address these issues, including setting aside provisions and restructuring its operations. However, the full extent of the compensation bills and the impact on customers remain to be seen.
