LONDON — Close Brothers shares climbed sharply after the UK lender said it could manage the financial hit from car finance compensation [1] linked to the ongoing car finance scandal, reassuring investors over its exposure to car finance claims, Wednesday, April 8, 2026. The statement helped ease concerns about the broader fallout from car finance mis-selling across the sector.

Bank says FCA car finance costs remain manageable

Close Brothers said it expects the Financial Conduct Authority (FCA car finance) redress scheme to cost about £320m, a figure largely in line with earlier projections and close to the £294m already provisioned for potential car finance refunds.

The lender added that any additional costs would be absorbed using existing capital reserves, leaving its long-term strategy intact. The update prompted a strong market reaction, with shares rising significantly during trading.

Rising car finance claims and PCP claims drive payouts

The compensation programme addresses widespread mis-sold car finance practices, including commission structures that inflated borrowing costs. As a result, car finance claims and PCP claims are expected to increase sharply as affected customers seek redress.

Close Brothers based its estimate on a large pool of eligible loans and a high expected participation rate. While its projected average payout is below the industry benchmark, the overall liability reflects the scale of car finance compensation and anticipated payouts 2026.

The bank said its figures include assumptions on claim volumes, operational costs and the timing of payments, which are likely to stretch into next year.

Market concerns over car finance mis-selling ease

The announcement helped counter recent speculation that Close Brothers might face a much larger bill from car finance mis-selling. The bank maintained that its current provisions remain appropriate, though it acknowledged that ongoing regulatory and legal developments could affect final costs.

In preparation for potential impacts, Close Brothers has already taken steps to reinforce its balance sheet, including divesting parts of its business and reducing expenses.

Competitors face mounting pressure from car finance compensation

Elsewhere in the sector, some lenders are taking a much more cautious approach. FirstRand, which has UK operations Aldermore and MotoNovo, has announced it would make a significant increase in its provisions to cover car finance compensation [2], after becoming increasingly concerned about the structure of the FCA car finance scheme. The group is now understood to be exploring the sale of its UK operations, as it faces increasing strain from PCP refund demands and a flood of car finance refund claims.

Industry braces for payouts 2026

The varying responses highlight the disparate impact that the car finance scandal is having on lenders. While some lenders, including Close Brothers, have said they will be able to absorb the costs, others are assessing their position in the market. As billions are set to be paid out through car finance compensation schemes, it is expected that compensation payouts 2026 will have a significant impact on the industry. As the number of consumers doing a car finance refund check, submitting PCP claims and seeking to be made whole for mis-sold car finance agreements continues to rise, this is likely to drive industry changes.

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References:

1. Close Brothers shares climbed sharply after the UK lender said it could manage the financial hit from car finance compensation - https://www.theguardian.com/business/2026/apr/08/close-brothers-shares-surge-uk-bank-comfortably-absorb-car-finance-compensation
2. FirstRand, which has UK operations Aldermore and MotoNovo, has announced it would make a significant increase in its provisions to cover car finance compensation - https://www.bloomberg.com/news/articles/2026-04-07/firstrand-raises-provisions-for-uk-car-loan-misselling-saga