By JOHN-PAUL FORD ROJAS, DEPUTY BUSINESS EDITOR
Close Brothers suffered a fresh prang from its motor finance arm as it took a £33million hit related to 'historical deficiencies' in the way it dealt with car loan customers.
The provision comes on top of a £165million sum already set aside to deal with a separate industry-wide issue related to motor lending.
That helped send the group to a £122million loss for the year to the end of July, down from a £133million profit a year earlier.
Close Brothers is among lenders that have taken a significant financial hit as a result of legal and regulatory action connected to the way car loans were sold.
It centres on commissions paid to car dealers by lenders and whether they resulted in motorists paying too much for the loans.
Separate setback: The lender is put aside a £33m provision over the way it dealt with loans paid back early by customers
Now, it is facing a separate setback also related to motor finance – this time to do with the way it dealt with loans that were paid back early by customers.
That has resulted in a £33million provision which Close Brothers said was the 'best estimate based on the information currently available'.
It said it had acted to rectify the issue and expected to contact affected customers early in 2026.
Chief executive Mike Morgan said the problem had been identified by the lender's own staff.
He told the Mail: 'When a customer settles but overpays generally by a relatively small amount, in not all instances has that overpayment been reimbursed to them.
'So what we have here is a large number of relatively low amounts going back a long way and we need to put redress in place.
'We've identified it, it's contained to motor finance, and we've got processes and procedures now to start to reimburse so we'll do that just as soon as we can.
'I'm not pleased with it, it's not good, but we just need to get on, deal with it and move on.'
It came as the firm, which is restructuring by shedding its underperforming businesses, also revealed that it was winding down its vehicle hire operation – resulting in a one-off £30million writedown.
Shares in the group initially tumbled by as much as 11 per cent, before recovering to 1 per cent down.
Close Brothers is among a number of lenders that have been affected by the wider car finance commission scandal.
Others include Lloyds Banking Group, which has set aside £1.15billion to deal with it, while Santander has made a £295million provision
The compensation bill could total as much as £18billion, according to the Financial Conduct Authority (FCA), which is examining 30million loan agreements struck between 2007 and 2021.
