LONDON — Close Brothers shares plunged after a short seller alleged the UK merchant bank understated its exposure to motor finance risks [1] tied to the growing car finance scandal, raising fresh concerns for customers and investors about the scale of car finance claims. The allegations have intensified scrutiny over how loans were sold and why many drivers are now pursuing car finance compensation, with fears building around industry-wide payouts 2026.

Shares fall as concerns hit confidence

The bank’s stock dropped sharply as investors reacted to claims that provisions for potential mis-sold car finance cases may be too low. The short seller argued that Close Brothers could face far higher costs [2] from each car finance claim and PCP claim than previously expected.

For many investors, the issue is no longer theoretical. It reflects a growing belief that the true cost of car finance mis-selling has yet to be fully recognised. Close Brothers said its figures remain appropriate, but uncertainty is rising as more car finance claims come forward.

Drivers come forward with PCP claims

At the centre of the issue are PCP claims linked to Personal Contract Purchase agreements, one of the most common ways people finance cars in the UK. Many customers say they were unaware that brokers could increase interest rates to earn higher commissions.

That lack of transparency is now driving a surge in car finance claims and individual PCP claim cases. For affected drivers, the issue is personal. Some say they paid more than they should have without realising it, and are now seeking a car finance refund or PCP refund.

Legal specialists say claims are increasing week by week, as awareness grows. If rulings favour consumers, lenders across the market could face significant car finance compensation costs.

A scandal spreading across the industry

The problem is not limited to one lender. The wider financial sector is under pressure as regulators examine whether car finance mis-selling was widespread.

Millions of agreements could be affected, turning what began as a regulatory review into a full-scale car finance scandal. Banks and finance firms are now reassessing their exposure as they prepare for more car finance claims.

Some have already increased provisions, while others are being pushed to explain how they will handle future car finance claim and PCP claim liabilities.

Regulatory uncertainty adds to pressure

At the same time, the UK government is considering changes that could limit the powers of the Financial Conduct Authority [3], the body leading the investigation into mis-sold car finance.

Ministers say reforms are designed to support growth, but critics warn this could weaken oversight just as the number of car finance claims rises. The timing has raised questions about how effectively the industry will be held accountable.

For consumers seeking car finance compensation, the outcome of both the investigation and any regulatory changes could shape how quickly claims are resolved.

Outlook shaped by payouts 2026 expectations

Attention is now turning to what happens next. Analysts say the pace of new car finance claims and PCP claims will determine how large the final bill becomes.

There is growing focus on payouts 2026, with expectations that many cases could reach resolution around that time. If large numbers of drivers receive a PCP refund after confirming their eligibility from a car finance refund check, the financial impact on lenders could be substantial.

For now, the investors and the customers are all watching. What started as a technical issue around commissions has turned into a human story of trust, transparency and the cost of getting car finance wrong.

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References:

1. Close Brothers shares plunged after a short seller alleged the UK merchant bank understated its exposure to motor finance risks - https://www.ft.com/content/e2386fb4-c8a9-44b5-9086-eb156d07dc7d 
2. The short seller argued that Close Brothers could face far higher costs - https://www.thisismoney.co.uk/money/markets/article-15651325/Close-Brothers-shares-slump-short-seller-claims-motor-finance-provision-double.html
3. the UK government is considering changes that could limit the powers of the Financial Conduct Authority - https://www.ft.com/content/3a65980c-fda6-4ed0-bb84-b14675443beb