Close Brothers Motor Finance has resumed issuing new vehicle finance agreements as part of a phased return following its temporary pause in lending on October 25.
The halt was initially implemented in response to a Court of Appeal decision that mandates increased transparency in commission disclosures within the motor finance industry. The recent judgment has left the sector in disarray, as industry leaders assess how to adapt to these significant new legal requirements.
Close Brothers initially reintroduced new business on November 2 with specific partners and now plans to gradually restore lending operations with all third-party partners.
The decision to pause lending stemmed from the Court of Appeal’s recent ruling, which forced brokers to disclose any commissions received from lenders when arranging vehicle loans, with customers needing “fully informed consent.
Seán Kemple, CEO of Motor UK and Retail Finance Ireland for Close Brothers, explained: “The Hopcraft Court of Appeal judgment led to a unique situation that meant unprecedented change was needed, almost immediately. We took the difficult decision to pause lending for the right reasons, to keep our customers, partners, and our business safe. I want to say a special thank you to my colleagues for reacting so quickly to the new requirements for commission disclosure, working night and day to develop an effective solution very quickly.”
Close Brothers initially announced its intention to appeal the judgment in the Supreme Court which could mean industry-wide compensation liabilities exceeding £16 billion. Other major finance players, including Lloyds Banking Group and Santander, could also be severely impacted by the financial repercussions.
The Court of Appeal judgment consolidated cases involving Close Brothers and Firstrand Bank, which had challenged earlier Financial Ombudsman Service (FOS) decisions on commission disclosure.
Stephen Haddrill, director general of the Finance & Leasing Association, remarked at the time: “This is a significant and unexpected judgment, the implications of which stretch far beyond the motor finance sector, making it an issue that demands the immediate attention of the FCA.”
The motor finance industry has responded with calls for regulatory and legal clarity with Adrian Dally, FLA director of motor finance at the Finance and Leasing Association, advocating for a stay on FOS complaints and court cases related to commission payments.
“Our view is this should go to the Supreme Court on an expedited basis and, pending the final answer from the highest court, we think there should be a pause on complaints going to the Financial Ombudsman Service. We think there should be a stay for market stability and integrity,” he said.
