Car finance - hidden commission payments
Discussion
Forester1965 said:
The list price of the finance (the interest rate), was hidden. The salesman was free to create their own 'list' price. The consumer had no way of knowing whether they were paying at, above or below the list price set by the finance provider.
Bank base rate is not hidden, how much a bank would charge is not hidden, the APR on the agreement must be shown on the document signed. This is down to the buyer being too idle.Dixy said:
Bank base rate is not hidden, how much a bank would charge is not hidden, the APR on the agreement must be shown on the document signed. This is down to the buyer being too idle.
On the finished document all the details will be on it. The issue as I understand it is the true APR offered by the finance company was not disclosed and the salesperson was free to demand a higher one. The APR the salesman signed the customer up to is the one the customer saw and paid. They never knew they'd paid more for the finance than they should have.We'll have to beg to differ if we think that's how consumer finance should work.
Dixy said:
Forester1965 said:
The list price of the finance (the interest rate), was hidden. The salesman was free to create their own 'list' price. The consumer had no way of knowing whether they were paying at, above or below the list price set by the finance provider.
Bank base rate is not hidden, how much a bank would charge is not hidden, the APR on the agreement must be shown on the document signed. This is down to the buyer being too idle.13.9% APR You're actually eligible for 3.9% APR, but we've handed control of setting the rate over to the salesperson, who; on a sliding scale will get a commissioned bonus for every point above 3.9% he can get you into signing up for, all the while portraying the APR as set in stone best possible interest rate you're eligible for, and omitting he gets a bonus for getting you above the best possible rate you're eligible for.
KingNothing said:
Don't think you'll find many finance agreements which feature in the paperwork:
13.9% APR You're actually eligible for 3.9% APR, but we've handed control of setting the rate over to the salesperson, who; on a sliding scale will get a commissioned bonus for every point above 3.9% he can get you into signing up for, all the while portraying the APR as set in stone best possible interest rate you're eligible for, and omitting he gets a bonus for getting you above the best possible rate you're eligible for.
Well put.13.9% APR You're actually eligible for 3.9% APR, but we've handed control of setting the rate over to the salesperson, who; on a sliding scale will get a commissioned bonus for every point above 3.9% he can get you into signing up for, all the while portraying the APR as set in stone best possible interest rate you're eligible for, and omitting he gets a bonus for getting you above the best possible rate you're eligible for.
Zero Fuchs said:
KingNothing said:
Don't think you'll find many finance agreements which feature in the paperwork:
13.9% APR You're actually eligible for 3.9% APR, but we've handed control of setting the rate over to the salesperson, who; on a sliding scale will get a commissioned bonus for every point above 3.9% he can get you into signing up for, all the while portraying the APR as set in stone best possible interest rate you're eligible for, and omitting he gets a bonus for getting you above the best possible rate you're eligible for.
Well put.13.9% APR You're actually eligible for 3.9% APR, but we've handed control of setting the rate over to the salesperson, who; on a sliding scale will get a commissioned bonus for every point above 3.9% he can get you into signing up for, all the while portraying the APR as set in stone best possible interest rate you're eligible for, and omitting he gets a bonus for getting you above the best possible rate you're eligible for.
Forester1965 said:
We'll have to beg to differ if we think that's how consumer finance should work.
Surely that is how all sales work, it will cost this much. If you need me to tell you that I will be paid for this out of the profit we make or that you may be able to find it cheaper else where are you fit to be out without your carer.Dixy said:
Surely that is how all sales work, it will cost this much. If you need me to tell you that I will be paid for this out of the profit we make or that you may be able to find it cheaper else where are you fit to be out without your carer.
It isn't how all sales work. Especially not with regulated financial products being sold by commission hungry sales people.Dixy said:
Forester1965 said:
We'll have to beg to differ if we think that's how consumer finance should work.
Surely that is how all sales work, it will cost this much. If you need me to tell you that I will be paid for this out of the profit we make or that you may be able to find it cheaper else where are you fit to be out without your carer.
Here is a quick summary of a judgement the FCA made against Black Horse. If you want to whine at anyone then make sure it's the FCA and that Pesky Consumer Credit Act of 1974 (I guess the conservatives government at the time was primarily responsible for that).
So it's not a new law. Full details here https://www.financial-ombudsman.org.uk/decision/DR...
⎯ The discretionary commission model Black Horse used in Mrs Y’s case, created
an inherent conflict between the interests of the Broker and the interests of
Mrs Y, as it gave the Broker an incentive to set a higher interest rate than Black
Horse would have accepted so that the Broker could receive more commission.
⎯ In introducing and operating the discretionary commission arrangement with the
Broker on the terms it did, Black Horse acted contrary to the guidance at CONC
4.5.2G and failed to have due regard to Mrs Y’s interests and treat her fairly as
required by Principle 6 of the Financial Conduct Authority’s (“FCA”) Principles for
Businesses (the “Principles”).
⎯ It is likely a court would conclude that the relationship between Black Horse and
Mrs Y was unfair to Mrs Y under s140A of the Consumer Credit Act 1974
(“CCA”) for any or all of three reasons:
(1) Black Horse’s introduction and operation of the discretionary
commission arrangement which delegated the interest setting power
to the Broker and created an inherent conflict between the interests of
the Broker and those of Mrs Y by linking the amount of commission
the Broker would receive to the interest Mrs Y paid. This created an
unfair relationship both generally and because it meant Black Horse
failed to comply with Principle 6 and CONC 4.5.2G.
DRN-4188284
2
(2) The inequality of knowledge and understanding created by Black
Horse’s own failure to disclose: the basis on which it would pay
commission; and the Broker’s ability to determine the interest rate
(and, therefore, the amount of commission the Broker would receive
and the payments Mrs Y would have to make).
(3) The Broker’s failure to disclose the structure of the discretionary
commission arrangement in accordance with its regulatory
requirements and guidance (in particular, CONC 4.5.3R, CONC
3.7.4G(2) and Principle 7 and 8) in circumstances where this failure
is, under s. 56(2) CCA, deemed to be a failure of Black Horse.
So it's not a new law. Full details here https://www.financial-ombudsman.org.uk/decision/DR...
⎯ The discretionary commission model Black Horse used in Mrs Y’s case, created
an inherent conflict between the interests of the Broker and the interests of
Mrs Y, as it gave the Broker an incentive to set a higher interest rate than Black
Horse would have accepted so that the Broker could receive more commission.
⎯ In introducing and operating the discretionary commission arrangement with the
Broker on the terms it did, Black Horse acted contrary to the guidance at CONC
4.5.2G and failed to have due regard to Mrs Y’s interests and treat her fairly as
required by Principle 6 of the Financial Conduct Authority’s (“FCA”) Principles for
Businesses (the “Principles”).
⎯ It is likely a court would conclude that the relationship between Black Horse and
Mrs Y was unfair to Mrs Y under s140A of the Consumer Credit Act 1974
(“CCA”) for any or all of three reasons:
(1) Black Horse’s introduction and operation of the discretionary
commission arrangement which delegated the interest setting power
to the Broker and created an inherent conflict between the interests of
the Broker and those of Mrs Y by linking the amount of commission
the Broker would receive to the interest Mrs Y paid. This created an
unfair relationship both generally and because it meant Black Horse
failed to comply with Principle 6 and CONC 4.5.2G.
DRN-4188284
2
(2) The inequality of knowledge and understanding created by Black
Horse’s own failure to disclose: the basis on which it would pay
commission; and the Broker’s ability to determine the interest rate
(and, therefore, the amount of commission the Broker would receive
and the payments Mrs Y would have to make).
(3) The Broker’s failure to disclose the structure of the discretionary
commission arrangement in accordance with its regulatory
requirements and guidance (in particular, CONC 4.5.3R, CONC
3.7.4G(2) and Principle 7 and 8) in circumstances where this failure
is, under s. 56(2) CCA, deemed to be a failure of Black Horse.
As I said in my first post on this subject. It will have to be paid for by the rest of us, the financial institutions are all going to get another shafting, to make up for this lending rates will go up and deposit rates will come down. The motor trade have lost a significant income stream, discounts will reduce as will part exchange allowances.
But we must protect the idle and feckless.
But we must protect the idle and feckless.
Dixy said:
As I said in my first post on this subject. It will have to be paid for by the rest of us, the financial institutions are all going to get another shafting, to make up for this lending rates will go up and deposit rates will come down. The motor trade have lost a significant income stream, discounts will reduce as will part exchange allowances.
But we must protect the idle and feckless.
Thoughts and prayers at this difficult time. But we must protect the idle and feckless.
Dixy said:
As I said in my first post on this subject. It will have to be paid for by the rest of us, the financial institutions are all going to get another shafting, to make up for this lending rates will go up and deposit rates will come down. The motor trade have lost a significant income stream, discounts will reduce as will part exchange allowances.
But we must protect the idle and feckless.
Given that the "idle and feckless" in this issue were the car dealers and the banks with their lazy and unscrupulous behaviour, I really don't think they are being protected.But we must protect the idle and feckless.
Dixy said:
As I said in my first post on this subject. It will have to be paid for by the rest of us, the financial institutions are all going to get another shafting, to make up for this lending rates will go up and deposit rates will come down. The motor trade have lost a significant income stream, discounts will reduce as will part exchange allowances.
But we must protect the idle and feckless.
None of that is true.But we must protect the idle and feckless.
Lending rates will remain competitive each other. It’s no good charging 10% when your fierce rivals who didn’t participate in dodgy practices offer 5%. Same as with banks now. Banks that paid out billions still offer competitive loan and mortgage rates - people vote with their feet and will move for am extra 0.1% on their savings.
Motor trade have been dealing without this since 2021 when it was outlawed. I didn’t see a swathe of closures then so why would they now?
Part-ex will always be driven by the markets. You’ve got something they want they’ll offer you more than if you have something less desirable.
Nothing will really change at all for the consumer. Business will adapt as they have done since 2021 and they’ll always be one manufacturer offering cutthroat deals to move stock.
PF62 said:
Dixy said:
As I said in my first post on this subject. It will have to be paid for by the rest of us, the financial institutions are all going to get another shafting, to make up for this lending rates will go up and deposit rates will come down. The motor trade have lost a significant income stream, discounts will reduce as will part exchange allowances.
But we must protect the idle and feckless.
Given that the "idle and feckless" in this issue were the car dealers and the banks with their lazy and unscrupulous behaviour, I really don't think they are being protected.But we must protect the idle and feckless.
They always had your salary details in front of them, I expect that the higher your salary and the higher cost of the car the more likely you were to have the interest rate increased out so they could get a nice commission payment.
If you look at one of the FCA cases, the dealer made money on both the trade in and the car sale, they also got the commission payment and the finance company ended up losing money on the deal because the buyer cashed in early. No clawback of commission.
valiant said:
Dixy said:
As I said in my first post on this subject. It will have to be paid for by the rest of us, the financial institutions are all going to get another shafting, to make up for this lending rates will go up and deposit rates will come down. The motor trade have lost a significant income stream, discounts will reduce as will part exchange allowances.
But we must protect the idle and feckless.
None of that is true.But we must protect the idle and feckless.
Lending rates will remain competitive each other. It’s no good charging 10% when your fierce rivals who didn’t participate in dodgy practices offer 5%. Same as with banks now. Banks that paid out billions still offer competitive loan and mortgage rates - people vote with their feet and will move for am extra 0.1% on their savings.
Motor trade have been dealing without this since 2021 when it was outlawed. I didn’t see a swathe of closures then so why would they now?
Part-ex will always be driven by the markets. You’ve got something they want they’ll offer you more than if you have something less desirable.
Nothing will really change at all for the consumer. Business will adapt as they have done since 2021 and they’ll always be one manufacturer offering cutthroat deals to move stock.
Arguably what is more of a threat to those that think they are the best negotiator’s in the world and need no protection from those not adhering to the regulations is the Agency model that seems to be becoming more widespread.
I wonder how this impacted Mercedes’ dealers and their customers ?
sugerbear said:
PF62 said:
Dixy said:
As I said in my first post on this subject. It will have to be paid for by the rest of us, the financial institutions are all going to get another shafting, to make up for this lending rates will go up and deposit rates will come down. The motor trade have lost a significant income stream, discounts will reduce as will part exchange allowances.
But we must protect the idle and feckless.
Given that the "idle and feckless" in this issue were the car dealers and the banks with their lazy and unscrupulous behaviour, I really don't think they are being protected.But we must protect the idle and feckless.
sugerbear said:
They always had your salary details in front of them, I expect that the higher your salary and the higher cost of the car the more likely you were to have the interest rate increased out so they could get a nice commission payment.
And those that did that are rightly being punished for that behaviour.sugerbear said:
If you look at one of the FCA cases, the dealer made money on both the trade in and the car sale, they also got the commission payment and the finance company ended up losing money on the deal because the buyer cashed in early. No clawback of commission.
Then the finance company ought to have been a bit smarter and thought about that before offering the deal.justin220 said:
I had a quick look through one of my previous agreements, and it does state -
'We may pay a commission in respect of the agreement to the credit intermediary'
That's perfectly normal and happens across many finance products (not pension investments/investments, typically).'We may pay a commission in respect of the agreement to the credit intermediary'
Forester1965 said:
justin220 said:
I had a quick look through one of my previous agreements, and it does state -
'We may pay a commission in respect of the agreement to the credit intermediary'
That's perfectly normal and happens across many finance products (not pension investments/investments, typically).'We may pay a commission in respect of the agreement to the credit intermediary'
But the seller being able to set their own commission based on the % they can hawk to? That is outrageous.
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