S&U shares (LON: SUS) are rallying strongly today, up 3.8% at 1,500p, having earlier fallen to a low of 1,370p. This almost 10% swing comes as the motor and property finance specialist issued a warning regarding significant challenges in the motor finance sector.
The company has been particularly affected by a recent ruling from the Court of Appeal concerning motor finance commissions.
The Court of Appeal’s ruling is a direct result of an investigation conducted by the Financial Conduct Authority (FCA). The investigation scrutinised discretionary commission arrangements within the sector. According to Lloyds Banking Group PLC, the ruling could compel lenders to dole out billions in compensation, a prospect that has alarmed industry participants, including S&U.
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S&U’s Advantage motor finance arm reported net receivables of £295 million between August 1st and December 10th, marking a 10% decline compared to the previous year. The company attributes this downturn to the ruling, which they believe imposes a retrospective duty of care on lenders and brokers, further complicating trading conditions.
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Additionally, S&U has highlighted the issue of claims management companies (CMCs) exploiting the situation by leveraging social media to file opportunistic claims. S&U anticipates that a newly proposed formal charging regime for CMCs will help deter these spurious claims.
Beyond regulatory challenges, S&U also criticised the recent Autumn Budget, arguing that it has diminished consumer and business confidence to the lowest point in four years. Despite these hurdles, S&U reported group-wide net bookings of £449 million, which is comparable to last year. The company’s Aspen Bridging property finance segment played a crucial role in maintaining this performance.
S&U continues to navigate a series of challenges arising from regulatory changes and macroeconomic conditions. The company is focusing on addressing these concerns to stabilise its operations and continue delivering value in a changing financial environment.
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