Close Brothers Group PLC (LSE:CBG) said it expects to face costs of about £320 million from the UK motor finance redress scheme.
The merchant banking group said the estimate compares with an existing provision of £294 million set aside as of January and reflects the Financial Conduct Authority’s policy statement last week on compensating customers for historic commission arrangements on car loans.
The company said no changes have yet been made to its existing provision, which remains under review.
The FCA redress scheme covers around 720,000 loans written by the company between April 2007 and November 2024. Of these, Close Bros said about 640,000 relate to discretionary commission arrangements, with a further 80,000 potentially captured under other criteria set by the regulator.
Management has assumed an average payout of about £500 per customer, which is below the FCA’s industry estimate of £829, reflecting smaller loan sizes and lower commission levels in its book.
The group expects around 75% of eligible customers to claim. A 5% change in that rate would move the total cost by roughly £18 million.
Implementation costs are estimated at £66 million, excluding £14 million already incurred. Payments are expected to run from summer 2026 to the end of the 2027 calendar year.
If taken in isolation, the £320 million hit would reduce the group’s CET1 capital ratio by around 25 basis points to 14.0%. That remains above its medium-term target range of 12-13%.
The company said it will continue to monitor legal and regulatory developments, including potential challenges to the scheme, before making any final adjustments.