Discretionary Commission Arrangements - Complaints and Refunds

Close Brothers Motor Finance


Close Brothers Motor Finance claims to be “one of the UK’s leading providers of motor finance; committed to providing a range of services allowing their customers to pay for their vehicle through monthly instalments.”

The independent vehicle finance company was founded by brothers William, Fred, and James Close in 1988 as part of the Close Brothers Group PLC, and promises to “make finance easy”, “treat you as an individual’, and “be a lender you can trust”. 

What is car finance?

Recent figures from the Finance & Leasing Association show that car finance is a multi-billion-pound industry – with its members cashing in over £37 billion worth of new consumer vehicle finance deals for both new and used cars in the UK, in 2021 alone.

A new car can set you back thousands of pounds, and for a large majority of the population is a purchase likely to take months of saving to afford. With the demands of everyday life, a car is a necessity for many of us, and often an old out-of-shape car, or growing family means that waiting to buy just isn’t an option. Car finance allows peoples all over the country to afford those all-important wheels- without the months of waiting and saving. Car finance allows customers to spread out the cost of their car over months or even years.

What car finance options are available?

Car finance is the process of paying for a vehicle over a set duration of moneys or years, instead of paying the cost upfront. Although other options are available, these are the three most popular types of car finance:

Personal Contract Purchase (PCP)

A Personal Contract Purchase gives customers the option to pay a deposit on their vehicle (usually 10% of the cars total value), followed by monthly repayments over a set period of time. These monthly payments are based on the price of the car, the APR (interest rate) and the predicted depreciation of the car’s value over time. At the end of this time, customers are given the option to either keep their car and obtain ownership by paying the guaranteed minimum future value (GMFV or ‘balloon payment’), or they can step away and hand back the car.

This type of car finance means you don’t end up paying the full price for the vehicle through monthly repayments, but you don’t end up owning the car at the end of the fixed term. If you do decide to keep the car, the GMFV or ‘balloon payment’ will see you paying out more than the original price of the car. It should be noted, there are guidelines in place as to what condition a car must be in if you decide to give it back at the end of the payment period. This can include a maximum annual mileage, and charges for any damages deemed to be more than general ‘wear and tear’.

Hire Purchase (HP)

Hire Purchase refers to hiring the vehicle from the lender until you have paid off its full price. This is one of the most commonly used types of car finance and uses the vehicle itself as security for the loan. Customers can choose whether they to pay an up-front deposit (usually 10% of the cars total value), this is followed by set monthly repayments over a period of time.

This option can be attractive to customers as there are no mileage limitations, and no need for lump sums of cash to exchange hands. However, as the loan is secured against the vehicle, failure to fulfil the monthly repayments could lead to repossession and could negatively impact your credit score.

Personal Contract Hire (PCH)

Personal Contract Hire (also known as leasing) is similar to hiring a car. Customers opting for PCH will pay a deposit (often the equivalent to three-six months of repayment), pay a fixed amount each month, and can use the car within the space of time in which payments are being made to the lender. 

Car finance contracts of this type usually last for two to five years. Typically, longer agreements lead to lower monthly repayments. This type of finance does not however give customers the option to purchase ownership of the car once the agreed length of contract has ended.

What constitutes the mis-selling of car finance

The mis-selling of car finance can be described as a dealer or broker allowing a customer to be sold a car finance product that is not appropriate for them and their finance situation. The FCA (Financial Conduct Authority) focuses on guiding customers to buy better value and more appropriate car finance products, making sure that the deal they enter into is affordable for them. Despite the best effort of the FCA, customers continue to regularly be mis-sold car finance.

The mis-selling of car finance can look varied and can arise from many situations. Here are some examples of what mis-sold car finance may look like if it has happened to you:

  • Your income and outgoings checks, in place to assess a finance deals “affordability”, has been incorrectly assessed.
  • The lender/ salesperson who sold you the car finance product did not explain the interest charged to a satisfactory or comprehensive level. This leads to you paying inappropriately high interest rate for your financial situation and misunderstanding or being in the dark about the agreement you have entered into.
  • You were rushed or pressured into buying car finance by the lender/salesperson. The Lender/salesperson may have not explained the product properly or may have not had the knowledge to sufficiently do so.
  • The lender/ salesperson failed to explain the commission details of your car finance deal with you, and it transpires that the dealer was profiting substantial commission from the overly expensive interest you were paying. The FCA estimates that some form of commission model is present in up to 95% of car finance deals. Four out of ten car finance agreements functioned in a way where the higher the interest paid by the customer, the higher the commission the broker would get. This framework was disallowed in January 2021, and many customers who took out car finance before this date may have been affected.
  • You may have misunderstood that at the end of the fixed repayment term you would have ownership over the car. Personal Contract Purchase models are highly complicated, and if certain aspects of the contract aren’t made clear, it could be argued that this is unfair, and you have been mis-sold car finance. Often, PCP customers believe they are slowly paying off the price of their car through the monthly repayments, only to be met with the need for the balloon payment at the end of their fixed term in order to gain ownership. This means that many cannot afford the larger end payment and end up having to give back their car after months of payment.
  • Lenders/ salespersons should be unbiased and not lead you to purchase certain financial packages. If they “recommend” certain financial packages, they may have mis-sold the car finance. The lender/ salesperson should propose a range of options, including varying interest rates, smaller or larger deposit amounts, and a variety of repayment schedules.
  • The true owner of the car was not fully explained or made clear. In some cases, a third-party hire-purchase company are the owners of the car, so this is an important aspect to the finance package.
  • Overly high or unfair fines/charges are imposed for breaching agreement.
  • In some cases, you may have been charged a disproportionate amount for damages to the returned vehicle.
  • You can also complain about having problems with the actual vehicle you have received. While this is not a form of mis-selling, you still have a right to complaint.

Have you been mis-sold car finance?

If the reasons that someone may have been mis-sold car finance seem familiar to you and your car finance situation, then you may have been mis-sold car finance. In this case, it is your legal right to complain. Whether you are still repaying your car finance, or if you have paid the total amount, you can still make a complaint and potentially reclaim your money.

If you have struggled or are in an ongoing struggle to make your car finance repayments, then your loan could be deemed as “unaffordable”. A loan is only classified as “affordable” if you are able to repay the loan at the agreed rate without forgoing hardship, and are able to still pay for other commitments such as rent, mortgage repayments, and everyday expenses. If you are struggling, and you have not had a significant change in your financial circumstances since purchasing the car finance, you may have been mis-sold.

Redbridge Finance has helped customers in this position. The team is able to investigate the thoroughness of financial checks carried out by the car finance companies to ensure that you were able to make repayments for the duration of the loan. The team can represent you and your claim, and in the case that they do not agree with the lender’s decision (in the case a refund is denied), they will pass your case over to the Financial Ombudsman. These complaints are complex and can last for many months, during this time you must keep up with loan repayments, or you may face repossession of your vehicle. Redbridge Finance will keep you up to date with all essential information during your complaint process and will always ensure you are in the loop.

If you think you have been mis-sold your car finance product, or are experiencing issues repaying your loan, you could be entitled to a refund or compensation. Contact Redbridge Finance today by going to www.redbridgefinance.co.uk and signing up, and the team can assess if you have a claim.