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S&U: City regulator lifts collection restrictions on motor finance lender

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Banking and Fintech Reporter

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The UK's financial ombudsman said complaints about car loans had surpassed credit cards as the top product subject in the last quarter.
The UK's financial ombudsman said complaints about car loans had surpassed credit cards as the top product subject in the last quarter.

Specialist lender S&U said the City regulator agreed to remove collection process restrictions on its motor finance business after blaming the measures for a slide in profit this year.

The London-listed firm said it had imposed the voluntary restrictions during discussions with Financial Conduct Authority (FCA) on its forbearance procedures for borrowers facing financial difficulties.

While these restrictions have now been lifted, S&U said its dialogue with the FCA was “still ongoing and we anticipate they will also move towards a successful conclusion”.

S&U’s share price is down 16 per cent this year after repeated warnings that regulatory headwinds had weighed on its earnings.

Its pretax profit slumped by nearly half to £12.8m for the six months to 31 July, down from £21.4m a year prior.

In recent months, the lender has called on the new government to shake up the regulatory regime and bemoaned restrictions on its collections capabilities after the FCA hit it with a section 166 notice.

The notice requires S&U to produce a report by a so-called skilled person tied to the regulator’s Consumer Duty regime and sector-wide Borrowers in Financial Difficulty review.

“I am very pleased that the close dialogue and co-operative relationship we are forming with the Financial Conduct Authority resulted in this agreement,” S&U’s chair and former Conservative MP Anthony Coombs said on Monday.

“We have always prided ourselves on excellent customer relationships, and the reforms resulting from our dialogue with the FCA should make these even stronger.”

The 86-year-old lender makes the bulk of its money from its motor finance business, Advantage, which last week reported a sharp fall in half-year profit to £9.4m from £19.1m.

Profit at its property lending unit, Aspen Bridging, came in at £3.4m, up from £2.4m last year.

S&U has previously said that it is not exposed to the FCA’s separate review into discretionary commission arrangements on car loans, which analysts have estimated could cost the sector up to £16bn in compensation fees.