Motor finance provisions at Stellantis Financial Services UK and Close Brothers have reached a combined £541.3 million as an Upper Tribunal hearing begins today to consider the timetable for legal challenges to the Financial Conduct Authority’s redress scheme.
Business Matters magazine reports that Stellantis Financial Services UK has increased its provision from £37.1m to £221.3m during 2025, contributing to a £69.3m pre-tax loss. The business had reported a £69.4m profit in 2024.
Close Brothers last week also put aside an additional £164.7m during the year to July 31, 2026, taking its total provision to approximately £320m. It reported a statutory pre-tax loss of £60.3m, although adjusted operating profit was £120.3m.
The figures emerge as the Upper Tribunal holds a two-day case management hearing on October 5 and 6. It is expected to consider disclosure, expert evidence and other procedural issues rather than determine whether the FCA’s scheme is lawful.
Provisions expose financial strain
In its latest accounts, Stellantis Financial Services UK’s – a joint venture with the French bank BNP Paribas – warn that “significant uncertainty remains regarding the ultimate cost” and that “actual outcomes may differ materially from the amount provided”.
Last week, in preliminary results for the year ended 31 July 2026, Mike Morgan, Close Brothers chief executive, also said the business had added £164.7m to its provision which now stands at around £320 million.
“As we await further clarity on the outcome, our focus remains on the execution of our strategy,” Morgan stated.
The group has also withheld its final dividend for the 2026 financial year because of continuing uncertainty around the legal challenges and their potential financial impact. The lender estimates that around 720,000 loans arranged between 6 April 2007 and 1 November 2024 qualify for redress.
Other lenders have also booked substantial motor finance provisions. Lloyds Banking Group’s provision stood at £1.95bn at the end of June 2026, while Barclays held £430m. BMW Financial Services (GB) reported £611.6m at the end of 2025, Mercedes-Benz Financial Services UK’s latest filed provision was £423.8m and Ford’s FCE Bank group had provided £155m.
The FCA estimates that 12.1 million agreements entered into between April 2007 and November 2024 could qualify and expects lenders to pay approximately £7.5bn in redress, with a further £1.6bn required to administer the scheme.
Tribunal to set preparation window
The hearing could clarify whether the substantive legal challenges will be heard over five days from December 14 to 18, 2026 or over nine days from February 16 to 26, 2027.
The later timetable is likely to be required if applications for additional expert evidence or disclosure are permitted.
The distinction matters to lenders and their dealer partners because a December hearing would leave a significantly shorter preparation period if the scheme is upheld. A February hearing would extend the uncertainty but provide more time to address historic data gaps, test calculations and prepare customer communications.
The challenges have been brought by Volkswagen Financial Services, Mercedes-Benz Financial Services, CA Auto Finance UK and Consumer Voice, which is represented by Courmacs Legal.
The three lenders are contesting elements including the scheme’s scope, presumed causation of loss, redress methodology and compensatory interest. Consumer Voice argues from the opposite direction that the scheme does not provide motorists with sufficient compensation.
Parts of the scheme were suspended by the Upper Tribunal in July. The suspension means lenders are not currently required to calculate or pay redress in affected cases, but the FCA has made clear that firms must continue complying with provisions that remain in force.
The FCA expects lenders to continue preparing so far as possible, while avoiding work that could need to be repeated if the challenges succeed.
If the scheme is upheld and any judgment is not appealed, compensation payments are expected to begin during 2027. A judgment could take several weeks after the substantive hearing, while further appeals could extend the timetable.
The FCA said: “We will defend it robustly as lawful and the best way to resolve such a widespread, long-running and complex issue.”
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