 Characteristically comprehensive and straight-talking Trading Update from Coombs this morning. Re the pending Supreme Court case, he said the following (note the final sentence - he's not one to sit on the fence, is he?!).
"The question does remain as to whether this new encouragement of responsible risk-taking will extend to the Supreme Court, when it reviews last October's Court of Appeal decision on commission disclosure which has so disrupted the entire motor finance market. Again, the signs are cautiously encouraging. The speed with which the Supreme Court is considering the matter and their sanctioning direct representations from the Treasury, the FLA, and the Financial Conduct Authority, speak to a common-sense approach. My view is that even should the Supreme Court uphold the lower courts' decision in principle, any 'harm' found to have been suffered by consumers will be so marginal as to make demands for redress minimal.
On a wider note, there's been quite a lot of comment recently about the Courts going beyond their remit and becoming law-setters rather than law-enforcers. In this case, the Appeal Court had applied an interpretation which fell outside the FCA's own rules so it's hard to see what could have been 'breached' by the lenders. |
No comment here on the Reeves intervention? It's sent STB up quite sharply and given that SUS has questionable involvement at worst in the "misselling" this might be quite good news for the shares. |
Martin Lewis on claiming compensation from the motor industry: https://www.moneysavingexpert.com/reclaim/car-finance-undeclared-commission/Commendably, he is on the fence about claiming compensation following the wider 'commission disclosure' legal ruling, which is the ruling that effects SUS. He implies huge claims based on this ruling may impact the future of the industry and the availability of motor finance generally. Hopefully his influence may lower the potential claims, but let's see. |
Rather declinist update being met with surprisingly bullish share price A sign of worse expectations being baked in here? |
Posting an unlocked version of the above Telegraph article: FCA boss criticised by Badenoch for "overreach" |
I'm not sure I need to, Sophia. One of the (many) things I like about this company is that the Board/management are incredibly open with shareholders. They always present results etc via the InvestorMeet website, both presenting their side and inviting and answering shareholder queries. They are also good at updating as and when circumstances need (last one being 29/10) so if they have news that they are able and allowed to say, I am sure they will tell us. 'Insider' rules mean that they are not going to tell me anything that isn't already in the public domain. |
Jeffian, excellent comment. Thank you. As you have gone deep into this, perhaps you could directly contact the company and see if we can understand a little more? |
There's an article in todays Telegraph ( ) which may be behind a paywall but you can probably access it by taking a 'free trial'. It's mainly about the FCA but interestingly Chairman Coombs is quoted, involving SUS. It is a reiteration of the current situation arising from the recent Court of Appeal decision but it does give me some cause for concern, whereas previously I was comforted by the idea that SUS was simply not involved in the commission practices being investigated.
Of course the previous FCA investigation for which SUS has just been given clearance didn't involve commission at all, it was all about 'affordability' checks and practices for collecting from distressed borrowers. Insofar as the Commission cases going through the Courts were concerned, these were brushed off. In a trading update on the subject, SUS said "In the meantime, S&U notes that these decisions do not specifically relate to 'difference in charges' models of commission (currently the subject of an FCA review) in which Advantage Finance has never been engaged." However, the article makes it clear that it is not just practices where loans were offered on the basis of the highest commission earned by dealers and not disclosed to the borrower, but cases where any commission was involved which had not been specifically disclosed to the customer and approved by them. Of course, it is not at all certain that the Appeal Court decision will stand but it would be nice to know from the company whether they have ever been involved with commission of any sort and whether their customers were aware of this. |
There is a story in today's press about lawyers acting on car finance claims complaining that Lloyds are "swamping" them with correspondence in response. Given that these ambulance-chasers are drumming up mass claims with little care about whether they are valid or not, I must admit my initial reaction was "if you dish it out, you should be prepared to get it back". |
Hi chris,
"While i am fairly confident we don’t have significant liability here, the association is enough to punish us with the rest."
That was certainly my view before, and what led me to buy a few more recently at 1727 (ouch!), but I'm afraid I'm not as confident now "we don’t have significant liability" because the Court Of Appeal has moved the goalposts. Clearly we were not involved in the type of loans where brokers commission was hidden from the customer or influenced the cost of the loan, but the Court decision seems to say that any loan involving a broker's fee may result in a claim for mis-selling and I'm not at all clear whether that involves SUS or not.
There are clearly a number of steps to go through. Firstly, the Appeal Court's decision is being challenged, so we may revert to the position where SUS is simply not affected. Secondly, we need clarity on whether SUS would be affected if the Appeal Court decision stood. Thirdly, we need to understand the potential extent of any compensation. It's not yet known whether this will lead the FCA to reopen their investigation into SUS but, either way, it would seem to put a brake on new business in the short term and a potential big hit if they are drawn into the compensation scheme in the longer term so, whilst this may well be "one of the best buying opportunities I’ve had for years", it would take a very, very brave person to plunge in while these matters remain unresolved.
My own position will be to sit on my hands and do nothing (as ever!) until things become clearer. I am an admirer of the management's attitude to shareholders and I am sure that, as per their last statement on 29/10, they will continue to update us promptly as things evolve, but I see the shares remaining under the cosh until things are clearer. |
It does Jeffian. And whether using cash to reduce some of that debt as an efficient strategy, is open to challenge. So it’s simply a personal view. I’m a very long term holder here and my contrarian nature is screaming buy more. I don’t think the cloud is going to lift from this sector of the market for quite sometime. While i am fairly confident we don’t have significant liability here, the association is enough to punish us with the rest.
The question i am wrestling with therefore, is could this be one of the best buying opportunities I’ve had for years, to add to my holding. At my age, income Is far more important than capital gain. I’ve always been very comfortable that S&u would quietly generate enough cash to return a decent income to shareholders year after year and without too much disruption. I just have to convince myself (or work out) if that is still the case?? |
Not having a pop, but those bullish have badly misread this.
Buy now, pay later will be the next area for compensation, following car finance loans. |
Surely the business model works on borrowing, chris? (Secure finance on fixed or rolling term from the banks and re-lend at significantly higher rate for quite short periods. Average Advantage loan less than 5 years). If you rely on equity finance, you limit your growth potential severely. |
What we are witnessing here is classic market over-reaction. I wasn’t intending buying any more but it’s now very tempting. If I’m honest, the only thing holding me back is the level of debt. It puts me off. I would prefer future dividends be directed to bringing it down. However, as we know, there are a few family members who would block this. The significant family ownership has always, in general, been one of the big attractions for me but occasionally it gets in the way. |
Aye, my last top-up (#1753) is looking a bit precipitate! |
Added 150 shares at 1350p. Might fall further from here in but planning to hold for years to come so not too worried about short term market fluctuations.
Spread was ridiculous as usual around 1450p, put in a limit order which got fulfilled in 10 seconds. Go figure. |
This morning’s news that the FCA is now likely to broaden the scope of its investigation is the latest kick. I won’t be selling but I had been considering adding. Which i won’t be doing presently. We probably have further to fall as this news has only increased the weight of the anchor that was already holding us back. |
Jeffian thanks for the heads up; I would qualify that this the same Tempus that recommended CAML as Buy in Sep 2023 at 191p. |
If you go to archive.is and paste in the URL that should work for non-subscribers |
There's quite a long piece in the Times' 'Tempus' column today (behind a paywall, I'm afraid) with an "Avoid" recommendation.
They do seem to grasp that the current litigation over commission-led deals does not affect SUS (which has never used that model) but feel it will remain a shadow over the whole sector for a while. The conclusion seems to be to wait and see whether the recovery in business since the completion of the FCA enquiry comes through in line with the Chairman's statements. |
Not sure I quite understand that remark. SUS were, at the outset and for very many years, a 'doorstep lender' and took what at the time appeared to be the dramatic and rather brave (or 'worrying' for us shareholders) step of selling the whole business and starting out anew in car finance, later supplemented by property finance. This turned out to be an inspired decision and timing. SUS have prospered precisely because they are NOT loan sharks but provide modest amounts of credit on acceptable terms to people who may not otherwise be able to borrow at all from traditional sources such as banks. This is a prosperous, secure, well-run family business and I can't see how "leaving it all together" would be of any benefit at all to the company, its shareholders and customers. |
I imagine they are more likely wondering why they bother operating in the car finance market at all. Better off leaving it all together for the loan sharks to pick up the pieces. |
The financial press this morning is full of stories about the car sales market being in meltdown as the main commission-led lenders (Lloyds, Close etc) have frozen all new business in the light of the latest Court judgement against them. Although this relates mainly to new car sales on PCP-type contracts and SUS deal mainly in small loans in the used-car market, one wonders whether there is an opportunity here for them to step in and fill at least part of the gap? Every cloud.... |
Well it didn't work out too well in the short term but I'm still happy that it was the right decision for me in the longer term! |
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