Shares in car finance firms slammed into reverse after a London court sided with consumers in a row over ‘secret’ commissions attached to loan deals.
Close Brothers tumbled 24.5 per cent, or 89.8p, to 276.6p and Lloyds Banking Group – whose Black Horse arm is a major player in the car loan industry – fell 7.3 per cent, or 4.5p, to 57.66p after a landmark ruling in the Court of Appeal.
The judges found that dealerships owed a fiduciary duty to consumers taking out loans to buy cars and as such had to act in their best interest.
This meant dealers could not lawfully receive a commission from lenders ‘without obtaining the customer’s fully informed consent to the payment’, the court added.
The ruling could open the door to more demands for compensation from lenders such as Close Brothers and Black Horse. The ruling came as the Financial Conduct Authority investigates the motor finance sector over claims customers faced rip-off commission charges when buying a car.
Hit hard: Close Brothers tumbled 24.5 per cent, or 89.8p, to 276.6p and Lloyds Banking Group fell 7.3 per cent, or 4.5p, to 57.66p
Analysts have estimated the sector’s total compensation bill could reach £16billion.
The London market ended a tricky week in the red ahead of what looks set to a bleak
Budget for investors, households and businesses.
The FTSE 100 index fell 0.3 per cernt, or 20.54 points, to 8248.84 while the FTSE 250 inched up 0.1 per cent, or 29.36 points, to 20,819.91. The sell-off came amid mounting speculation over the scale of the tax rises Rachel Reeves will unveil in her first Budget as Chancellor on Wednesday.
While stocks clocked up weekly losses, gilt yields have risen as the bond markets look nervously on.
The ten-year gilt yield – a key measure of government borrowing costs – topped 4.27 per cent on Thursday. That was the highest since before the election and up sharply from around 3.75 per cent in mid-September.
Shares in English winemaker Chapel Down sank 12.4 per cent, or 5.9p, to 41.6p after it called off plans to sell itself. The Kent-based group told investors that ‘there were no transactions that would create superior long-term shareholder value than Chapel Down remaining a stand-alone AIM-listed company’. The decision came as it warned that a smaller harvest will push it into a loss this year. It expects a harvest of around 1,875 tons this year – down from 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 its second day of trading.
Having floated at 140p a pop and risen to 150p in early trading on Thursday, the Liverpool-based company dropped 5.9 per cent, or 8.5p, to 135p yesterday.
First Group ended the week as it began – buying a coach company. The firm bought Lakeside Group, a Shropshire and Cheshire-based bus and coach company. The deal followed the acquisition of
London coach firm Anderson Travel for an undisclosed sum on Monday. Shares edged forward 0.4 per cent, or 0.5p, to 137.8p.
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