Updated: 14 October 2025

Originally Published: 11 March 2025

Over the past few years, the Close Brothers car finance claim has hit the national headlines as thousands of UK motorists have stepped forward with complaints they were overcharged and didn’t know about the commissions involved. The controversy forms part of a wider car finance scandal UK that has prompted regulatory investigations and a proposed redress scheme by the Financial Conduct Authority (FCA). This summary explains what is the Close Brothers scandal, the main accusations, and how affected drivers may now be entitled to a Close Brothers compensation claim under the new FCA proposal.

What Is the Close Brothers Scandal?

Close Brothers Finance, a major division of Close Brothers Group, has long been a leading lender offering Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements to UK drivers. Although competitive rates and flexible terms allowed many to buy a car at a reasonable price, later mis-selling practices came under investigation, which had been misinforming customers over the actual costs and commissions.

The question of what is the Close Brothers scandal centres on claims that dealers inflated customer interest rates to earn hidden commissions. Some dealers altered auto finance contracts’ interest rates based on the secret commission they would earn from Close Brothers [1]. This practice led to higher payments for many consumers who were unaware of these backroom arrangements.

Why the FCA and Consumer Watchdogs Are Investigating

The Financial Conduct Authority (FCA) began an investigation into Close Brothers when it started to see an increase in complaints about unfair lending and lack of disclosure. It found a widespread issue with non-transparent agreements, weak affordability checks and discretionary commission arrangements (DCAs) that incentivised dealers to raise rates.

DCAs enabled brokers to charge interest rates that increased their commission. This created conflicts of interest. Consumers were seldom told how commissions affected the cost of their loan. Overpaying without realizing it, became the rule for consumers. The FCA’s investigation also found that many customers were unaware of large balloon payments required at the end of their PCP deals or hidden fees embedded in their contracts.

Allegations Against Close Brothers

The allegations against Close Brothers include three key issues:

1. Inflated Interest Rates via DCAs – Dealers were allowed to adjust customer interest rates to maximise commissions. Interest rates were hiked if they had a poor credit rating.
2. Non-disclosure of terms – Customers were not told about balloon payments, early repayment charges and excess mileage fees.
3. Incorrect Affordability Checks – Borrowers were being given loans they couldn’t afford, a practice which could amount to irresponsible lending.

This pattern of behaviour forms the basis of thousands of Close Brothers claim back requests and consumer complaints submitted to the Financial Ombudsman Service (FOS).

Consumer Complaints and Legal Action

A surge in consumer complaints has led to growing legal challenges against Close Brothers. Borrowers allege that they were misled about loan affordability, ownership terms, and true interest costs. Many have sought redress through the FOS or independent claims experts specialising in Close Brothers finance claim reviews.

As the FCA continues to assess evidence, Close Brothers remains a focal point in the industry-wide investigation into car finance mis-selling. The case has parallels with problems at other big lenders and points to systemic failings in transparency and compliance throughout the UK motor finance sector.

Close Brothers’ Response and FCA Directives

Under pressure from regulators, Close Brothers has set aside significant funds to reimburse affected customers. Close Brothers Finance has gone ahead to reserve £165M to address the car loan commission scandal and pay compensation to the affected customers [2].

The FCA has also required the lender to address systemic shortcomings. In Close Brothers’ official commission complaints guidance, it is stated that they have been asked to ‘implement remedial action to put things right’ which involves reviewing unfair contracts and refunding those overcharged in their finance agreements [3].

Despite these steps, progress has been slow. Customers continue to report communication delays and unresolved cases. The FCA has decided to extend deadlines for lenders to process complaints more consistently once the final compensation regime is announced [4] so they are given more time to deal with claims.

Factors Influencing the Close Brothers Compensation Claim

Each Close Brothers compensation claim varies depending on several factors:

• The size of the overcharge: Consumers overpaying due to hidden commissions or inflated rates are entitled to refunds proportional to the excess interest charged.
• Length of the agreement: The higher the amount of compensation, the longer the PCP or HP agreement due to the fact that interest would be charged over a long period of time.
• Evidence of mis-selling: Any tangible evidence like finance agreements, emails and incorrect/faulty sales literature would help the case.

The FCA suggests that average payouts may reach around £700 per affected agreement [5]. Those mis-sold due to discretionary commission structures or poor disclosure stand to recover the most.

How to Check If You Were Affected

It is possible to determine if you were mis-sold by reviewing your loan documents. Red flags to look for would be balloon payments or interest rate increases you don’t understand or excessive and concealed administrative and mileage charges. In case your contract didn’t outline commissions and clear terms of ownership you may be eligible to claim back compensation from Close Brothers.

If you suspect mis-selling, you can:

1. Request written clarification from Close Brothers about how your interest rate and commission were calculated.
2. Submit a formal complaint directly to the lender.
3. Escalate your case to the Financial Ombudsman Service if you receive no satisfactory resolution.

For step-by-step guidance on car finance claims, see What to Know About Recovering Car Finance Compensation for Mis-Sold Deals.

The FCA’s Proposed Nationwide Redress Scheme

In October 2025, the FCA proposed to introduce a national car finance mis-selling compensation scheme, for agreements entered into between 6 April 2007 and 1 November 2024 [6]. Millions of UK car owners could be paid a refund by the scheme if they were mis-sold car finance as a result of hidden commissions and over-inflated interest rates.

The regulator analysed over 32 million contracts and found evidence of widespread unfair practices. In August 2025, following the Supreme Court ruling [7] that non-disclosure of commission creates an unfair relationship between lender and borrower, the FCA said it would establish a single, structured compensation programme.

Under this proposal, the FCA estimates a total redress potentially reaching £8.2 billion [8]. Including operational costs, the entire scheme may total nearly £11 billion; one of the largest consumer redress efforts in UK history.

The FCA’s consultation is open until 18 November 2025, with final rules expected in early 2026. Payments could start later in 2026 if approved, so the refund could be a long time coming for thousands of mis-sold PCP and HP claims, including the Close Brothers finance claim.

What Happens Next for Consumers

Drivers who have a valid Close Brothers car finance claim case, should now have an easier and more direct path to follow to reclaim unfair charges in the near future, without having to endure long court processes. In the meantime, you can start gathering your relevant documents and reviewing your loan agreement to see if it involved discretionary commissions or inadequate disclosures.

As billions of pounds in potential claims are overseen by the FCA, the Close Brothers case has taken centre stage in the effort to restore transparency and fairness in the UK car finance industry. Those who are unsure of their eligibility should consult with legal or financial claims advisors who specialise in Close Brothers compensation claims cases to ensure they receive all they are owed.

Final Thoughts

The Close Brothers scandal shone a light on problems with the sale and administration of car finance across the UK. Now that the FCA is pressing ahead with its redress scheme, drivers who have unwittingly paid inflated interest rates as a result of secret commissions may finally get justice. For those exploring their options, visit Close Brothers finance claim to learn how to start your claim and recover the compensation you deserve.

FAQs

Do I need my car registration or finance paperwork to claim?

No. Most lenders can locate your agreement from your personal details.

What if my lender has gone out of business?

The FCA’s redress scheme is expected to address claims even where the lender no longer operates.

Can I go to court instead?

Yes. You can choose not to join the scheme and take your case to court. It might take longer and cost more, but it remains an option.

How much compensation could I get?

The FCA expects average payouts of around £700 per agreement, but the amount could be higher for some customers.

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References:

1. dealers altered auto finance contracts' interest rates based on the secret commission they would earn from Close Brothers - https://www.ft.com/content/9d24f4d5-480a-4d2f-aebc-3d93ab4d7b73
2. Close Brothers Finance has gone ahead to reserve £165M to address the car loan commission scandal and pay compensation to the affected customers - https://www.theguardian.com/business/2025/feb/12/car-finance-scandal-lender-sets-aside-165m-for-possible-compensation-costs
3. In Close Brothers’ official commission complaints guidance, it is stated that they have been asked to ‘implement remedial action to put things right’ which involves reviewing unfair contracts and refunding those overcharged in their finance agreements - https://www.closemotorfinance.co.uk/customers/help-centre/commission-complaints
4. The FCA has decided to extend deadlines for lenders to process complaints more consistently once the final compensation regime is announced - https://www.fca.org.uk/news/statements/fca-consult-extending-time-motor-finance-firms-handle-commission-complaints
5. The FCA suggests that average payouts may reach around £700 per affected agreement - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
6. In October 2025, the FCA proposed to introduce a national car finance mis-selling compensation scheme, for agreements entered into between 6 April 2007 and 1 November 2024 - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
7. Supreme Court ruling - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
8. the FCA estimates a total redress potentially reaching £8.2 billion - https://www.fca.org.uk/publication/consultation/cp25-27.pdf