Close Brothers Finance Claims: Are They Refunding and Who Can Claim?

Close Brothers is amongst the biggest lenders in the UK, and with controversies arising over its practice, people have started to doubt whether car finance agreements are a good idea. There have been serious concerns raised about the integrity of car-finance agreements, brought about by the Close Brothers Finance mis-selling scandal, which left a lot of customers seeking refunds.

These issues are particularly related to undisclosed commissions, loan costs, and misleading loan terms. If you think you have been mis-sold an agreement that you got from the Close Brothers, then it’s time for a refund. Here, we’ll guide you and explain the eligibility of refunds, what causes mis-selling, and the steps you need to take to claim compensation. 

Why Are Customers Seeking Refunds?

Thanks to people and customer groups raising awareness, there has been a growing realisation amongst car finance customers to check their agreements and assess whether they too have been mis-sold, like the ballooning number of customers who have submitted their complaints. There have also been numerous allegations of mis-selling, which is brought about by excessive interest rates, hidden commissions, and loan terms that were either not explained or mis-explained. 

How Many People Are Affected, and What Has the FCA Said?

The Close Brother Scandal has affected thousands of consumers, making numerous drivers eligible for Close Brothers refund and compensation. According to the Financial Conduct Authority (FCA), these practices are harmful to consumers and are being investigated to ensure customers are properly compensated. FCA also reminded financial institutions to ensure full transparency in their loan agreements to avoid these issues arising again. At the same time, FCA urges consumers to come forward should they think they have been affected as well. Records also indicate that due to the number of affected individuals, there’s a huge possibility that the Close Brother’s Finance car finance portfolio will be impacted. 

Why Are Close Brothers Finance Claims Happening?

The main reason behind Close Brothers finance claims is the central issue and allegation that the UK lender violated the terms of a car finance agreement by not providing full, transparent information about key elements such as interest rates, loan terms, and commissions. Customer reports also showed that they were unaware of how the finance was structured, which also led to an inflated cost of borrowing.

The Role of Discretionary Commissions in Inflated Loan Costs

Discretionary commissions are among the key factors in the car finance scandal. Finance providers paid commissions to dealers for arranging loans – mostly unfair ones. What’s worse is that most of these commissions were undisclosed to customers, which caused mis-selling. The cost of the loan was higher than it should have been, as dealers will tend to charge higher interest rates, ones that aren’t fitting to the borrower anymore. 

This practice prioritises the interest of the dealer rather than the lender, compromising the financial standing of the customers. Also, the lack of transparency regarding commissions means customers may have been paying more than they should have for their car finance.

The Role of FCA

The Financial Conduct Authority (FCA) plays a crucial role in the industry of car financing, as it is a regulatory body that has actively been involved in investigating financial situations to ensure that customers who have been victims of mis-selling and unfair practices will receive the appropriate compensation. 

FCA has also been vital in building confidence among consumers to check their agreements and make their claims despite the lengthy and tedious process involved.

Who Can Claim a Refund?

Everyone who has mis-sold a car finance agreement by Close Brothers Finance is entitled to a refund, with no exceptions. So if you’ve been mis-sold, then don’t worry, as you can make a claim. Here are specific eligibility criteria that will help you determine if you are subjected to mis-selling. Check your loan agreement for any of the following issues. If any of them are present, then you may be eligible for compensation. 

1. Hidden Commissions in Finance Agreements

Discretionary commissions are the main culprit behind the Close Brothers Finance mis-sold agreements. These discretionary commissions are payments that have been made by lenders like Close Brothers Finance to car dealers in lieu of arranging the car finance deals in their favour. What usually happens here is that the lender offers car dealers commissions to urge them to get the agreements via their financing, regardless of whether it is affordable for the buyer or is the best financial option for them. 

Typically, these commissions are a percentage of the loan amount, or it can be a fixed sum paid to the dealer for every finance contract they will be able to close. This commission rate, however, is often not discussed with the customers, as this can put malice behind how much they are being charged. Chances are you’re paying more than your loan brought about by the increment the interest brings. 

How Do They Impact Your Loan?

With commission being paid to the dealer, this can have a huge impact on the terms of your car finance agreement, specifically inflated interest rates. However, the key issue still is that these commissions were hidden, meaning you were intentionally uninformed, nor were you given the opportunity to consider their impact on the loan’s cost.

How to Check for Hidden Commissions

• Check your loan agreement carefully, especially the interest rate. In case the interest is higher than you’ve anticipated, immediately tap the dealer and have them explain why the rate was set the way it was, as it could be due to hidden commissions.  
• Be upfront with Close Brothers Finance or your dealer, and ask whether any commission was paid as part of the finance agreement, and ask or assess yourself how it must have impacted your finance agreement. 
  

2. Misleading Loan Terms That Weren’t Fully Disclosed

Since car financing is a whole different concept, there can be loan terms that you may find confusing. Unfortunately, some dealers take advantage of this, and rather than explain the terms correctly, you will be misled into believing these terms are something else. Misleading loan terms can include the total cost, repayment schedule, and interest rate, which, when not explained properly for you, can lead to an ultimately different decision. 

There are also cases where the lender may deliberately provide you with confusing information so the loan will seem more affordable or appealing, and you should pay attention to this.

How Do They Impact Your Loan?

When key details about the loan are not properly disclosed, or you were misinformed on the true cost of your loan over time, then this constitutes to mis-selling. Being led to believe a term means one thing when it means another can be crucial in your decision-making process. Also, not knowing correctly how much real interest you’re paying can cause more expensive deals than it should be. Practices that deprive you of the opportunity to make an informed decision about your financing options. 

How were you affected?

• Hidden Fees or Charges like processing fees, insurance charges, and early repayment penalties can make your car financing more expensive and put you in financial distress.   
• Ambiguous Loan Terms happen when you enter into a contract that isn’t financially right for you. This often happens if the terms of the loan agreement aren’t properly explained to you. 

How to Identify Misleading Loan Terms

• Thoroughly check your loan agreement for terms that may be too vague or difficult for you to understand. Were these terms explained well, and were you given an explanation of how much your total credit will be, the amount of interest you’re paying, and any additional fees that may incur from the agreement? 
• Did the dealer or lender present the loan as an easy option without explaining how the interest would compound or how it would affect your repayments in the long run?

3. Excessive Interest Rates Due to Undisclosed Dealer Incentives

Close Brothers Finance and other lenders usually give out rewards and bonuses to dealers to encourage customers to take out financing options. Often, these incentives can come in some form of commission or kickbacks. The problem then arises when these dealer incentives cause excessive interest rates, which are passed to consumers. Higher incentives mean high interest rates, which, when left undisclosed, leave buyers paying for more. 

How Do They Impact Your Loan?

Dealer incentives put the dealer’s personal interest above yours, which means they may increase your interest rate so they get bigger pay. If this was disclosed to you, you may have made a different decision, as you may not have agreed, considering how much you’ll be affected by the incentive they’re getting. 

While it may seem like you’re getting an affordable deal, if you’re charged an interest rate than the original agreement, it can result in excessive payment over what you originally expected.

How were you affected?

• Excessive Interest Rates can make the loan you took out more expensive than it originally is. If you were not told about the incentives that your dealer received, then you may have been mis-sold a loan.
• Unexplained Rate Mark-ups are often results of dealer incentives, driving up the cost of the loan higher than anticipated. Unfortunately, this markup is also topped up on your total credit cost. 
  

How to Check for Excessive Interest Rates

• See the average market rate and compare it with your interest rate to gauge whether you’re being charged excessively high. If you noticed that the rate was higher even without a clear explanation from your dealer or lender, then this could be a sign that there was an undisclosed dealer incentive that influenced the terms of your loan. 
• Check your loan statement and the payment schedule for any discrepancies. If the interest rate seems too high for the type of car or the term of the loan, ask the lender for clarification.

What To Do If You Meet These Criteria?

If factors like hidden commissions, misleading loan terms, and excessive interest rates sound familiar to you, and you believe you were affected, then you may be eligible for a refund or compensation. Here’s the next step to take. 

1. Review Your Loan Documents - Check for any proof or evidence that outlines the issues above.
2. Contact Close Brothers Finance - Given the above criterion, you can now assess whether your loan was mis-sold. If positive, then you can reach out to Close Brothers Finance to file a formal complaint.
3. Seek Legal or Ombudsman Help - Should the unfortunate scenario happen that Close Brothers Finance does not resolve your complaint to your satisfaction, you can escalate the issue to the Financial Ombudsman Service or seek legal advice to ensure you are compensated for any mis-selling.

How to Check If Your Loan Was Mis-Sold

• Review your loan documents. Was there any mention of commissions and incentives? If not, they might have been hidden in the clauses of your contract, and you were mis-sold.
• Look for hidden fees and charges that were not fully disclosed at the time of signing.
• Compare the interest rate you have on your loan with the typical rates for similar agreements to see if yours is unusually high.
• If you didn’t receive any clear explanation of how the loan works or the costs involved in the agreement, this could be a sign of mis-selling.

How Much Could You Get in Compensation?

The amount of compensation you may be entitled to depends on factors such as how much you borrowed, the level of commission, and how much the mis-selling inflated your loan costs. Below is an example of how compensation could be calculated:

Case Study: "How One Consumer Reclaimed £1,981.60 from Close Brothers "

Scenario:

Ms. S took out a Hire Purchase (HP) Agreement with Close Brother’s Finance in July 2017. The agreement ran for 49 months, and Ms. S mentioned she was told a balloon payment of £4,000, which is higher than anticipated was due, so she decided to return the car instead. Right after, she was charged £1,981.60 for having exceeded her agreed mileage allowance. She was unhappy both with the balloon payment, which was different from the amount she had initially agreed upon, and the mileage charge. 

Ms. S filed a complaint to CB and was issued a final response in 2021. 

Reclaimed:

Ms. S's claim resulted in an adjustment of £1,981.S's0 from Ms. S's balance of £2,500, which was based on the overpayment due to the hidden commission.

Compensation Breakdown Table

For example, if you had a loan amount of £5,000 and the hidden commission was 3%, then you could expect a refund of £1,000. The compensation you receive will vary based on your individual loan details and the scenario of how you were mis-sold. 

Steps to Take If You Suspect You Were Mis-Sold

If you think you were mis-sold an agreement by Close Brothers Finance and you are amongst the victims of this car finance mis-selling scandal, then you might be entitled to compensation. To ensure you take the right steps in claiming against Close Brothers, this guide will help you address the situation methodically and effectively. Here’s how to proceed:

1. Review Loan Documents

The first step here is to carefully assess all the loan documents that you believe are relevant to your car finance agreement. You’ll be surprised how even the smallest correspondence can be enough proof of mis-selling. Include everything that can prove your transaction – from the loan agreement itself to any correspondence and additional terms and conditions involved during the process. What you need to do in this step is identify any discrepancies or unclear terms, especially on the key factors like interest rates, repayment terms, and commissions. 

Here are the key areas to look for:

• Hidden Commissions - Was there any mention of dealer commissions or additional fees? Typical mis-selling scenarios usually involve discretionary commission, which is left undisclosed to you during the time of the signing. There’s a high probability that the commission was buried in small print and wasn’t mentioned at all, constituting to mis-selling. 
• Unclear terms – Review the agreement again and check for the interest rates, repayment schedule, or any other fees which was involved in the loan. Were the key terms explained properly to you? Was it in a manner you understand correctly? Did your dealer or Close Brother Finance mention any idea of commission, which could impact your total credit cost?

If you find evidence of hidden commissions, excessive interest rates, or any misleading loan terms, these are red flags indicating mis-selling.

2. Check for Discretionary Commissions

Discretionary commissions are one of the main culprits behind mis-sold car finance agreements. The FOS has banned DCAs since 2021. DCAs are payments that your lender, like Close Brothers Finance, makes to the dealer for arranging the car finance agreement, and they can cause your loan cost to soar. Consumers who were mis-sold weren’t informed of these commissions, leading to an unknowingly higher price on the loan. 

Here are simple ways you can check:

• Make a comparison of your loan amount and its interest rate, and check if it is at par with the market interest rates for similar loans.
• Ask your dealer if there was any commission included in your agreement and how much it is. Asking your dealer directly gives you a straight answer. 
  

Should you find out that the dealer received a commission that wasn’t disclosed to you and directly impacted your loan’s interest rate or terms, this could be a solid basis for a mis-sold claim.

3. Contact your Lender to Make a Formal Complaint

In any case that you find evidence of mis-selling, or if you feel that you were unfairly treated in your car finance agreement, then you can start the process and reach out to your lender, or in this case, Close Brother’s Finance. While this is crucial, as you may feel discouraged to talk to them after the mis-selling, it will allow the lender to investigate your case and potentially resolve it. 

To make it easier, here are the important things you should include in your complaint. 

• Clear Evidence – Prepare copies of the loan agreement and any correspondence that will prove there was a mis-selling. This can be any piece of evidence to prove hidden commissions, unclear loan terms, and excessive interest rates. 
• Detailed Timeline of Events and the Case – Provide a clear timeline and summary of the events, including how you believe you were mis-sold. It is where your lender will base, and the more detailed and organised your complaint is, the better chances of a favourable outcome on your end. 

How to Submit a Complaint:

• Online: Finance companies like Close Brothers usually have a website, where they have an online form for complaints. 
• By Phone or Email: You can also contact Close Brothers directly via phone or email and explain your complaint to them. Just ensure to get a written confirmation of your complaint for future reference.

After you submit your complaint, Close Brothers Finance is legally required to investigate your case and respond within a reasonable time frame, usually eight weeks. They may offer you compensation or a resolution if they find your complaint valid.

4. Contact the Financial Ombudsman (If Necessary):

Sometimes, resolving an issue directly with your lender isn't possible, and you may need an intermediary to help escalate your concern. If you're not satisfied with how your lender has handled the case, you can take your complaint to the Financial Ombudsman Service (FOS). They can thoroughly review your dispute and work towards a resolution.

When should you contact the FOS? 

• After Eight Weeks: If you haven’t received a response within the eight-week timeline of submitting your complaint, you can escalate it to the FOS.
• Unsatisfactory Response: If you think Close Brothers resolution is not satisfactory to you, such as when they reject your claim or offer a low settlement, the FOS can step in to mediate and determine a fair outcome.
  

How to Contact the FOS:

• Online: You can file a complaint online on the FOS website. They’ll require details of your complaint and the outcome from Close Brothers Finance, as well as any supporting documents.
• By Phone: You can also contact the FOS by phone to discuss your complaint before submitting it in writing.

What To Do:

Once the FOS takes over, they will investigate your case impartially. If they find it in your favour, they may order Close Brothers Finance to pay compensation, correct the loan terms, or offer other remedies. The FOS’s decision is legally binding, and the lender must comply with it.

5. Seek Legal Advice or Support

In some cases, you may find it overwhelming to make the claim yourself, so it would be best to tap a professional or legal help instead. This makes you more confident with your claim, thus informing you on how the entire process works. There are solicitors and claims management companies who specialise in these consumer financial mis-selling cases and can guide you on the process to maximise the chances of receiving compensation successfully 

Asking for legal advice has the following advantages:

• Legal Representation: You can have a solicitor represent you should your claim fail to reach a resolution, causing escalation that requires legal intervention.
• Understanding Your Rights: Legal Professionals can help in clarifying whether your case qualifies for compensation and what steps to take.
• Support in the Claims Process: Claims management companies are those that specialise in financial mis-selling and can help you gather the necessary documentation, communicate with Close Brothers Finance, and guide you through the FOS process.
  

How to Find Legal Support:

• Solicitors: Look for solicitors with experience in financial mis-selling or consumer protection law. Many offer free consultations to help you assess the strength of your case.
• Claims Management Companies: If you prefer hiring a professional, then the best advice is to approach a PCP expert or a PCP claims management company that specialises in financial mis-selling claims. Just ensure that they are regulated by the Financial Conduct Authority (FCA) to verify their legitimacy.

Once you’ve identified a legal advisor or claims manager, the next step is to share all the relevant documents and details of your case so they can diligently assess your grounds, and the strength of your complaint. They’ll be able to offer guidance on the next steps, and in many cases, they’ll work on a no-win, no-fee basis, meaning you only pay if you win compensation.

Conclusion

The Close Brothers Finance mis-selling scandal sparked numerous claims and complaints, which only proves how much financial harm it caused to thousands of consumers who believe they were being sold unfairly. While considered a huge firm, it’s no exemption to paying compensation and refunds, as long as the case was mis-sold. In fact, it has already set aside £165M for compensation, considering the huge car mis-selling scandal.

If you, too, suspect you were affected by a Close Brothers mis-sold finance, then take action, as you may be eligible for a refund. 

By reviewing your loan documents, checking for hidden commissions, and following the proper channels to lodge a complaint, you can ensure your case is properly addressed. With the FCA’s involvement, more people are expected to receive compensation as the scandal continues to unfold.