London’s Upper Tribunal has partly suspended the FCA’s £9.1bn motor finance redress scheme, delaying lender payouts and lifting Close Brothers shares.
Close Brothers (LSE:CBG) shares rose sharply on Friday after London’s Upper Tribunal partially suspended the Financial Conduct Authority’s £9.1bn motor finance redress scheme, pushing back the timeline for compensation payments the bank has been provisioning against.
Shares in Close Brothers were trading at 426p on Friday morning, up 4.5% from Thursday’s close of 407.6p, after the Tribunal’s order was confirmed after market close the previous day. The stock has ranged between 318.4p and 563.5p over the past year, and Friday’s gain leaves shares below the 200-day moving average of 457.9p.
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The Upper Tribunal, which hears challenges to UK regulatory decisions, ordered the partial suspension on terms agreed between the FCA and a group of legal challengers: Credit Agricole, consumer group Consumer Voice, and the finance arms of Volkswagen and Mercedes-Benz, according to Reuters. Close Brothers was not among the challengers; most of the industry, including Lloyds, Barclays, Santander and Close Brothers, chose not to contest the scheme, though some lenders had questioned its scope.
Under the suspension, lenders do not have to calculate or pay compensation, or contact eligible customers about redress, until the legal challenges are resolved, Reuters reported. Firms must still respond to complainants who are not entitled to payouts under the scheme. Legal proceedings are expected in December 2026 or February 2027.
Close Brothers has set aside £320m for potential motor finance redress, covering roughly 720,000 loans written between 2007 and 2024, after the FCA finalised its scheme in March, cutting the industry-wide bill from an earlier £11bn estimate. Management has said the provision could be comfortably absorbed and reported that its core capital ratio rose to 14.3% in the first half despite the charge, even as the bank cuts around 600 jobs to reduce costs. It is the latest twist in a saga that has repeatedly triggered double-digit swings in the shares, from last August’s Supreme Court ruling to March’s short-seller report from Viceroy Research.
“We want to secure fair compensation for consumers as quickly as possible,” the FCA said, according to Reuters. “So, if the scheme is overturned, we may instead tell lenders to resolve complaints individually under the usual complaints process.” Daniel Gore, a partner at law firm Withers, said the dispute will likely be “a ferocious fight for every compensation percentage point and form of assessment criteria,” with lenders and consumers waiting to see whether the scheme survives at all.
If the scheme is upheld and not appealed, compensation payments could begin in 2027. If it is struck down and the FCA has to consult on a revised approach, redress could be delayed until 2028 or later. For Close Brothers, every month of delay buys time to rebuild capital before any cash payout falls due, though the underlying liability has not gone away, only its timing.