MARKET REPORT: Close Brothers and Lloyds collapse over car finance ruling

Shares in car finance companies fell sharply after a London court sided with consumers in a dispute over “secret” fees attached to loan deals.

Close Brothers fell 24.5 per cent, or 89.8 pence, to 276.6 pence and Lloyds Banking Group – whose Black Horse arm is a major player in the car lending industry – fell 7.3 per cent, or 4.5p, to 57.66p after a landmark Court of Appeal ruling.

The judges determined that dealerships owed a fiduciary duty to consumers taking out loans to purchase cars and, as such, had to act in their best interests.

This meant that dealers could not legally receive a commission from lenders “without obtaining the customer’s fully informed consent for payment,” the court added.

The ruling could open the door to further compensation claims from lenders such as Close Brothers and Black Horse. The ruling came as the Financial Conduct Authority investigates the car finance sector over allegations that customers faced fraudulent fees when purchasing a car.

Analysts have estimated the sector’s total compensation bill could reach £16bn.

The London market ended a difficult week in the red ahead of what looks to be a gloomy period.

Budget for investors, households and companies.

The FTSE 100 index fell 0.3 per cent, or 20.54 points, to 8,248.84, while the FTSE 250 rose 0.1 per cent, or 29.36 points, to 20,819.91. The sell-off came amid growing speculation over the scale of tax rises Rachel Reeves will unveil in her first Budget as Chancellor on Wednesday.

While stocks posted weekly losses, bond yields have risen as bond markets watch nervously.

The yield on 10-year bonds – a key measure of government borrowing costs – topped 4.27 percent on Thursday. This figure was the highest since before the election and represented a sharp increase from around 3.75 percent in mid-September.

Shares in English winemaker Chapel Down sank 12.4 per cent, or 5.9p, to 41.6p after it canceled plans to sell itself. The Kent-based group told investors there were “no transactions that would create superior long-term shareholder value for Chapel Down to remain an independent AIM-listed company”. The decision was made after warning that a smaller harvest would cause losses this year. A harvest of around 1,875 tonnes is expected this year, compared to 3,811 last year and 2,050 in 2022.

Shares in Applied Nutrition, the sports protein drink company backed by Wayne and Coleen Rooney, also fell on their second day of trading.

After trading at 140p and rising to 150p in early trading on Thursday, the Liverpool-based company fell 5.9 per cent, or 8.5p, to 135p yesterday.

First Group ended the week the way it started: buying a coach company. The company bought Lakeside Group, a bus and coach company based in Shropshire and Cheshire. The agreement came about after the acquisition of

London coach company Anderson Travel for an undisclosed sum on Monday. The shares rose 0.4 per cent, or 0.5p, to 137.8p.