Motor finance firm urges Labour government to loosen regulatory grip

S&U, the Solihull-based motor finance and specialist lender, is urging the new Labour government to “change the restrictive and constantly changing regulatory regime in this country, and the paternalistic mindset behind it” to boost the sector.

After a period of restrictions and caution due to the Financial Conduct Authority’s investigation in section 166 notices, S&U saw the value of advances drop by 10% in comparison to last year for its Advantage Finance division. This drop has also been driven by the tightening of criteria and lending price increases which saw S&U issue a profit warning in February.

As a result of customer complaints and claims over motor finance commissions, the FCA launched a review into the use of ‘discretionary commission arrangements’ (DCAs) between lenders and credit brokers to determine whether customers could be due redress.

Therefore, temporary changes were brought in for complaint rules. Negotiations are underway to remove the restrictions, which will have a significant impact on Advantage’s profitability. S&U says once the Section 166 process is completed, it will resume a profitable path.

S&U has welcomed the election of a Labour government “(at least for now)” which is committed to “restoring Britain’s feeble rate of growth” that could “gradually lead to a more pragmatic and realistic approach to regulation”.

It hopes decisions by the new administration will benefit the specialist credit markets, where recent estimates see between 16 and 17 million people in the UK, (up from 12 to 13 million in 2018) with non-standard credit requirements.

Aspen Bridging, S&U’s property lender, continues “from strength to strength”. The residential property sector, a fall in interest rates and its team generated record profits in June (more than double of last year).

The Aspen loan book now stands at around £149m (31st July 2023: £104m) an increase of £8m in the period and £19m in the year.

Anthony Coombs, S&U Chairman, said: “Although current trends at our Advantage, our motor finance business are undoubtedly challenging, we thrive on challenges and work for a significant rebound in the second half. By contrast, Aspen continues to trade sensibly and at record levels. We remain confident and determined for the year ahead.”