Close Brothers results: Motor finance market at critical crossroads amid mis-selling fallout
Hugh Fairclough, partner and head of financial services at RSM UK, comments on Close Brothers results:
“As today’s trading statement shows, Close Brothers’ prospects in the short to medium term depend largely on the final scope of the motor finance mis-selling compensation scheme. Lenders, regulators and the Treasury remain locked in negotiations over-compensation for mis-sold car loans.
“The UK motor finance market is at a critical crossroad, as regulatory uncertainty and fiscal changes threaten credit availability and affordability for millions of drivers. Consumers rely on the availability of motor finance which underpins 90% of new car purchases in the UK, a market worth £40 billion annually. Any contraction in lending by Close Brothers, and other providers, would also ripple through the automotive supply chain, impacting manufacturers, dealerships and associated services.
“Prolonged negotiations between the FCA, lenders, and the Treasury could lead to tighter credit conditions or higher interest rates as lenders seek to offset redress costs. Close Brothers has already set aside £300m for motor finance provisions, while Lloyds Banking Group has earmarked £1.95bn including customer redress and operational costs.”