Car finance mis-selling...

Pretty sure I saw this in action years ago when doing finance stuff part time when I was at uni. Every so often an application would come through that would make the dept do a collective “ooft” when you saw the % rate being used, when you put it through the system you then saw the commission going out to the dealer.

The trouble is that the dealer would just vary the rate from customer to customer depending on what they felt they could get away with. Basically rinsing the unsuspecting customer, hence this approach being banned in 2021. Very slimy odd-school car dealer stuff.

FFS, once again thick people who accept what a salesperson tells them and don't do thier own homework to check end up better off than those who did some due diligence...

FFS, once again thick people who accept what a salesperson tells them and don’t do thier own homework to check end up better off than those who did some due diligence…

Why would they end up better off? Better off than who, people who weren't taken advantage of?

FFS, once again thick people who accept what a salesperson tells them and don’t do thier own homework to check end up better off than those who did some due diligence

Not sure this really warrants a compensation scheme but that's a bit harsh. It's pretty difficult/nigh on impossible to get a representative sample of what interest rates other people are paying for their second-hand car from a specific dealership. Sure, for bigger dealers that crop up on reviews etc., you could get a ballpark idea but it wouldn't be hard to the dealership to convince people there were specific circumstances etc. that required their proposed rate.

FFS, once again thick people who accept what a salesperson tells them and don’t do thier own homework to check end up better off than those who did some due diligence…

Thank you for your input.

Show me on your next finance agreement where it says precisely what the Boycie sat in front of you is pocketing.

Last timeI was in a dealers talking finance I already had a quote for a car loan from Tesco so I had a ballpark figure.  Along with a quote from WBAC so I knew what ballpark my trade in should be in.

Took an hour to get the price of a car I was interested in. I had to tell him several times to quote me the APR not the flat rate. The APR dropped by about 5% when I told him of my Tesco quote.

He wouldn't move on the forecourt price of the car.  So it was a no from me.  I was looking a 3 year old Octavia petrol estate. Not many petrol estates about locally at the time.

Ended up paying an extra £2k  for a new Superb with 2 years free servicing.

I can understand where some people who aren't great with numbers could be bamboozled by salesman focussing everything on the monthly payments and  not on the cost to borrow.

No doubt there'll be a lot of car dealers who took advantage of this and rightly will be brought to task. Equally no doubt, there'll be a lot of dealers who have done nothing wrong, but will get buried in the paperwork proving their position.

If the FCA truly had the best interests on consumers in mind, they'd identify the dealers who worked in this way (easy enough to do, as the finance houses will each know the spread of rates on finance brokered), question the dealers and then compensate the customer upon judgement.

I find it a little ironic that if there are vulnerable customers who were taken advantage of, then the onus shouldn't be on the same vulnerable customer making a claim.

FFS, once again thick people who accept what a salesperson tells them and don’t do thier own homework to check end up better off than those who did some due diligence…

You don't have to be thick to not understand the nuances of car finance deals and what is on offer elsewhere. And while being savvy can get you a better deal, being unsavvy shouldn't mean you can get rinsed by someone selling you something that isn't the right deal; that's part of Financial Conduct is an obligation towards honesty because these are difficult products for the average person to understand.

So where that has happened, then it is right that correction is made.

I find it a little ironic that if there are vulnerable customers who were taken advantage of, then the onus shouldn’t be on the same vulnerable customer making a claim.

At least by making it easy to enquire and making sure the circumstances are properly reviewed, the onus goes part way back onto the seller.

How would I know what commission the salesperson or dealer was getting? What would trigger someone to complain further down the line.

The claims are not about the salesperson getting commission for selling the finance, it's about them being incentivised to push the higher rates above the lower rate deals. Plenty of customers qualified for the lowest rate offered but were only shown the higher rate deal as that gave the salesperson/dealer a bigger kickback. The FCA rules state that the customer should be informed of any deals that are better suited to them at the time of purchase and this was not always happening. It's this part that is being investigated.

Reading the Martin Lewis piece now, seems it is potentially widespread enough to be PPI sized, and that the way to address may involve just compensating en masse.

Two big Ombudsman cases revealed today indicate that firms are falsely rejecting complaints and the Financial Conduct Authority (FCA) is now to do a full review of complaint handling.

"The FCA wouldn’t do this unless it was likely to find they were doing it wrong. So my suspicion is when it finishes its investigation it will (in order of likelihood) set up either:

a) A redress scheme where it orders all the firms to pay redress to every effected customer even if they've not complained.<br />b) Redress rules where it orders them to pay out redress based on a set formula, to those that complain.<br />"The pay out would be either the interest on loans (which is big), the commission (which is big), or the whole loan (which is huge). We're possibly talking thousands back for many.

I'll admit, it is tricky. There is some justification in saying that as long as you were 'happy' with the deal offered (and, as per previous post, understood it properly / had it explained properly) then all's fair, but there's enough places where people are being fleeced to not trust that as a solution for all.

Also odd that in discussing screen price, it's a negotiation and if you ask for the best price you'll get the best price the dealer reckons they can get for themself while still getting the sale and we call it part of their job. Whereas theoretically, if you ask ' is that really the best you can do on finance' they're supposed to tell you no. AIUI they aren't necessarily required to tell you what the best deal is - but just tell you what they're offering isn't it.

I worked as a salesman for a big company which started selling card in Scotland. You know who I mean...

I was an absolutely to terrible salesman. But I remember being  taught that if the potential buyer decided to go to 5 years deal to reduce payments, then apr went up by 1% instantly, without telling them. Just to get extra money! They really are the sharks people think they are!

That's the thing about mis-selling - no one would buy it if they knew it was being mis-sold at the time. So the whole 'if they were happy what's the problem' argument is just ridiculous. 

Further info can be found here:

https://www.fca.org.uk/news/statements/fca-undertake-work-motor-finance-market  

Complaint disputes are usually dealt with by the Financial Ombudsman Service ("FOS").

The Financial Conduct Authority, who regulate financial service firms, usually leave the FOS alone to settle disputes between customers and firms. They don't intervene unless it's something big. The last time the FCA intervened like this was the PPI scandal.

FFS, once again thick people who accept what a salesperson tells them and don’t do thier own homework to check end up better off than those who did some due diligence…

+1

And one of the reasons I've always got good deals is that I look at EVERY number when doing a deal, and can do it in my head (which always surprises salesfolk).

With my last car I had cash but went with the PCP (and later balloon) as I them down to >1% pa over 4 years - no doubt paid for by the next/last customer who paid extra interest.

I work in FS, many of my colleagues don't seem capable of understanding this stuff, never mind our customers...

Rule #1 The car salesman is not your friend, and is not to be trusted.
Do YOUR research, work out what YOU want to pay and try to stick to it.
Be prepared to walk away. When THEY stop chasing you , then you know you have the best price 🙂

It's not about knowing what the salesperson was being paid, or doing particularly difficult maths.

It's a case of looking at total amount paid and going 'is that a cheap deal?' and spending two minutes looking at a compare loans site...

So yes I am harsh - but buyer beware, and why people who don't do 5 mins of homework will (like the excessive PPI compensations) will put people in a place better than if they had done their homework.

It’s not about knowing what the salesperson was being paid, or doing particularly difficult maths.

Numeracy levels in the population are ridiculously low, and compound interest and commission and balloon payments are beyond many's capabilities.

What's the option - have rules that are supposed to protect them from being too badly ripped off, that when not followed have implications? Or should the salesperson refuse to do a finance deal for some because they aren't blessed of the abilities to work out if the deal being offered is honest and fair?

It’s not about knowing what the salesperson was being paid, or doing particularly difficult maths.

Were the salespeople or their employers intentionally misleading about the proposition and what was available in the market place? essentially pushing people to use their finance (refusing or overpricing if you want to use your own); structuring deals towards monthly payments that sound better but have unattractive balloon payments; implying the finance is there to do you a favour not how they actually make most of their money!

Those maths might be simple enough for you, but many people are not as smart as you.  Many of them may have been misled by a sales person to believe they were getting a good deal, when the salesman knew they were not, and was personally incentivised to get them to sign a bad deal.

It’s a case of looking at total amount paid and going ‘is that a cheap deal?’ and spending two minutes looking at a compare loans site…

The issue is that car show rooms are just a front for selling you finance products.  Selling financial services is highly regulated and requires you to do certain things to stop consumers being exploited.  When greedy companies don't do things right there are consequences.  I've never bought a car on the showroom's finance because immediately assume its a crap deal - but my credit score is OK and I'm both numerate and financially literate.

So yes I am harsh – but buyer beware, and why people who don’t do 5 mins of homework will (like the excessive PPI compensations) will put people in a place better than if they had done their homework.

Will they be in a better place?  Ordinarily compensation aims to put you back in the place you would have been had you not been exploited, and the money chasing lawyers will be wanting their cut.

Undoubtedly some vulnerable people will have been exploited.  The consequence for that is that some chancers who were happy with the deal at the time and understood what they were doing will jump on the bandwagon.  Solution?  Don't exploit customers stupidity.

[Deleted -poly has it covered

Undoubtedly some vulnerable people will have been exploited.

]

Will they be in a better place?

My experience of friends and family is yes. They 'lost' a few hundred quid in payments out but compensation was awarded at a couple of thousand (as one example).

EDIT:

Undoubtedly some vulnerable people will have been exploited. The consequence for that is that some chancers who were happy with the deal at the time and understood what they were doing will jump on the bandwagon. Solution? Don’t exploit customers stupidity.

A fair point.
Though see my point above about people seemingly being put back in a better place.
Maybe my perception is wrong.

My mate works in pensions. He deals with multi-million pound pensions. You would think he had a decent mind for numbers, percentages etc. but got royally knobbled by a Renault dealer a few years back.

He was paying monthly for a car & that had a mileage limit attached. His Wife changed job & was going to be doing a lot more miles in the car. When they contacted the dealer, they were told that they could no longer finance the car in the same way as it was above the mileage limit for that type of finance.
But, they could switch to basically a loan to pay for remaining balance. He went into the dealer, signed the papers & trundled off home. It was only when he got home that he realised he had signed up to a loan at 13%!!
I bet the salesman had a right old chuckle over that one.

When I bought my Leon 3.5 years ago, the bloke was trying to push finance, which I think was around 9% at a time when Barclays/HSBC etc. were doing ~4% on personal loans. Amazing anyone would take the dealer finance, unless I suppose you couldn't get the bank loans due to credit score etc.

@poly has covered most of the relevant points already, but there's some breathtaking snobbery on this thread.

I worked for a company which organised a lot of PPI in the non-prime finance marketplace BITD. Our key client doesn't exist anymore, and the directors of it went to jail.

Lots of loans would be done where the customers had to take PPI as a condition of the plan. Or the customer wasn't eligible for cover. Or couldn't make a claim. Commission rates were massive.

The sort of people buying cover weren't the sharpest tools in the box, so when you're not well off and you need your car to get to work, and it starts to go wrong, you walk into a dealer and buy whatever for £whatever. And you believe what the nice man in the shiny suit tells you.

Same with the finance deals I imagine. They will show you the options that benefit them, not you.

A few years back Swintons were done by the regulator for something similar on motor insurance add-ons. ISTR their system defaulted to sorting by commission as well. https://www.fca.org.uk/news/press-releases/fca-fines-swinton-group-limited-%C2%A3738-million-mis-selling-monthly-add-insurance

When the deals are unwound I suspect compensation is paid plus interest at 8% flat p.a. as well.

FFS, once again thick people who accept what a salesperson tells them and don’t do thier own homework to check end up better off than those who did some due diligence…

I do sort of see this.  I have never taken PPI out knowing it was useless - so got nowt in compo!

My experience of friends and family is yes. They ‘lost’ a few hundred quid in payments out but compensation was awarded at a couple of thousand (as one example).

I do sort of see this. I have never taken PPI out knowing it was useless – so got nowt in compo!

But presumably as financially astute men of the world you were putting that money you saved by not falling for these scams into an account and now also have thousands of pounds saved up due to similarly compounding interest?

Though see my point above about people seemingly being put back in a better place.
Maybe my perception is wrong.

I guess it depends what being "put back better means".  If you were paying £10 extra a month for 4 years = £480, but you could have been earning interest on that money - not just for those 4 years, but also for the time until your claim was settled.  You may be entitled to some gesture of a few hundred on top of that for the pure cheek of them miss-selling (after all if the greatest risk to the perpetrator is he has to pay you back its not a big risk), and add to that the inevitable recognition that someone will have had to do a load of chasing / arguing / letter writing to get a settlement and either that was you, and your time is worth something, or you gave a chunk of your claim to a firm to do it for you.

Now, those most likely to fall for this are also exactly the sort of people who finish each month in the red and end up with bank charges, interest fees, missed credit card payments etc.  You could probably construct a story that said if they hadn't ripped you off that would have been 36x £20 a month for all the times you went broke.  Perhaps some would even end up using a payday loan at sky high interest.   I think its likely that those people are so financially ****less they'd have ended up in those situation anyway but you could clearly show how in some "sliding doors" moment person 1 pays £10 a month more, and 8 years later is £3000 poorer than their equivalent who got the deal they should have done.

remember that the PPI compensation was ~8%pa compound interest... during an era that had the BoE base rate and inflation around 1%. Shrewd investing might have netted you 5%.

now those base rate and inflation figures are around 5%+, so what should the victims be expecting?

But presumably as financially astute men of the world you were putting that money you saved by not falling for these scams into an account and now also have thousands of pounds saved up due to similarly compounding interest?

Lolz.  coke and hookers mate 🙂  Much better investment

Now, those most likely to fall for this are also exactly the sort of people who finish each month in the red and end up with bank charges, interest fees, missed credit card payments etc.  You could probably construct a story that said if they hadn’t ripped you off that would have been 36x £20 a month for all the times you went broke.<br /><br />

Me, basically - I really don’t do numbers, I have a sort of number-blindness so I’ve generally trusted a trained financial advisor to advise me on what is the best course of action to take. When the PPI thing kicked off, while chatting to my account manager at my bank, the subject of PPI claims came up, as I’d had some paperwork sent about it. She said if I wanted, she’d organise the paperwork, then deal with her end of it. A bit later, she said she’d had a response, if I wanted to pop in. After a few minutes chatting about something else, she asked how much I thought I’d got back, to which I said a couple of thousand would be nice, so she handed me a piece of paper.

I got back over £17,000…😳

I also got shafted by one of those PPI claims companies several years ago. I kept getting emails demanding that I pay them for the successful claim they made on my behalf, which I had no knowledge of. I kept on ignoring them, until they put in a court claim for the money they claimed I owed! <br />After a lot of digging around I found a payment into my bank account for around £7-8,000, which I hadn’t been notified about, and I managed to get the claims company to send me a copy of the document I’d signed, which they did. I’d apparently signed it on my birthday, when I’d spent most of the day in Bristol with my partner, and hadn’t used my phone or tablet for anything other than take photos and pay for things. My ‘signature’ was electronic and was a scribble that looked nothing like my actual signature.

Make of that what you will, but I coughed up and left it at that. I’ve since had further contact from the company, despite my telling them in writing to never contact me again. The company is Allay… 🤬

Where do we stand on other forms of unscrupulous selling then - there's a thread on statutory rights of return for distance selling for example. If a consumer's not savvy on their rights is it OK for a shop to take advantage of them, surely everyone should be aware before agreeing to buy something, etc.

These are major purchases, and a difficult product conceptually along with them, and claiming that unless you're clever enough to know all the ins and outs then you either shouldn't use them or deserve to be ripped off - have a word with yourselves!

"After a lot of digging around I found a payment into my bank account for around £7-8,000, which I hadn’t been notified about"

Erm, I respect your admission of financial illiteracy. But how on earth do you not notice that?

But presumably as financially astute men of the world you were putting that money you saved by not falling for these scams into an account and now also have thousands of pounds saved up due to similarly compounding interest?

Have you have noticed how expensive bikes are? 😉

@CountZero - wow.