Close Brothers claims car customers got good value in finance rip-off

The boss of troubled lender Close Brothers has hit back over car finance rip-off claims saying customers knew what they were paying and ‘got value throughout this’.

Mike Morgan’s comments came as the City watchdog prepares to reveal details of a multi-billion-pound compensation scheme for those mis-sold vehicle loans.

Close Brothers has estimated it faces a £300 million hit but last week a short-seller said it may be liable for four times the sum.

The scandal centres on commission paid by lenders to car dealers to sell loans to buyers – in some cases giving them juicier payouts for flogging pricier finance deals.

But Morgan told The Mail on Sunday: ‘I would contend you knew what you were paying for this car and you got the car.’

He said it was ‘quite different’ to the scandal of mis-selling of payment protection insurance from the mid-1990s to 2010, which cost banks £50 billion, adding: ‘The customer got value throughout this.’ 

Under a proposed compensation scheme set up by the Financial Conduct Authority (FCA) 14 million car finance deals arranged between 2007 and 2024 could be subject to payouts worth an average £700 each. The total cost has been estimated at £11 billion.

Morgan, whose firm axed a quarter of its staff – 600 jobs – on Tuesday to cut costs criticised the current shape of the scheme.

‘The way it’s structured at the moment doesn’t reflect the loss that customers have suffered and is disproportionate,’ he said. But some MPs last week said ‘drivers risk being short-changed’, arguing motorists should typically receive £1,200 each.

Last week short-seller Viceroy Research – famous for exposing German payment giant Wirecard and social housing landlord Home Reit – said Close Brothers had ‘substantially misrepresented’ its exposure to the FCA compensation scheme, and that even in a best-case scenario, the money set aside would have to rise to £572 million, hitting £1.23 billion in a ‘bear scenario’.

The lender, whose shares fell 14 per cent on Monday, strongly rejects the claim.