Major bank set to quit UK as it faces huge £750million car finance compensation bill

FirstRand owns MotoNovo, which makes up around one-tenth of the UK car finance sector, and is expected to pay £750million, up from a previous estimate of £510million.

It added that it would leave its car finance operations in the UK, with a notice to shareholders stating that it no longer had the "risk appetite" for the country.

The FCA's car finance compensation scheme applies to an estimated 12.1 million agreements between 2007 and 2024, with a total cost of around £7.5billion.

The redress scheme estimates that drivers could receive an average payment of £829 per agreement, while banks and lenders will fork out £9.1billion for all compensation and non-redress costs.

FirstRand blasted the compensation scheme, saying that it was "deeply flawed", "disproportionate" and "unfair".

It stated: "Cognisant of protecting shareholder value and ensuring Aldermore's future success, the group will ⁠work with the Aldermore board and respective regulators to facilitate an orderly ownership transition."

A spokesperson for Aldermore said the company was a "financially robust business" that delivers sustainable growth.

"We remain operating in our markets as usual, driving significant positive outcomes for our customers," the spokesperson added.

The FCA stated: "Our scheme provides certainty and is the most cost-efficient and orderly way to deal with liabilities that exist, no matter what.

"We welcome lenders, First Rand included, making financial provisions so they can deliver it.

"The market remains resilient - a record £41billion was lent on motor finance in 2025 and February's new car sales were the highest in 22 years."

The spokesperson added that major reforms were in place for the car finance industry, and that there are not expected to be any new compensation schemes on the horizon.

It comes as Close Brothers, another lender that is expected to owe millions of pounds, announced that it could "comfortably absorb" costs associated with the compensation scheme.

Original estimates suggested that Close Brothers would pay around £294million, while fresh data indicates that this will rise to around £320million.

However, it stated that the extra £26million can be "comfortably absorbed by existing capital resources, leaving the group well positioned to continue delivering its strategy".

The FCA said it hopes the first compensation payments would take place this year, while the vast majority of redress should be paid by the end of 2027.