Car finance - hidden commission payments
Discussion
Stupot123 said:
DonkeyApple said:
It shouldn't matter whether you were bone idle, thick as mince or put the effort in, at no point should the goods vendor ever have anything to do with the lending activity. It is just fundamentally wrong. Even the revised system of group rates and the finance specialist being put behind a wall, as if there is any evidence in the history of financial services that either somehow mystically creates an honest environment.
In the U.K. an absolute numpty should be able to buy both a car and a finance deal without being robbed. And the whole 'dealer contribution' fraud is just a disgrace on the FCA for being lobbied to allow a single industry to maintain a practice that has been banned in all other consumer lending because of its toxicity.
Valid.In the U.K. an absolute numpty should be able to buy both a car and a finance deal without being robbed. And the whole 'dealer contribution' fraud is just a disgrace on the FCA for being lobbied to allow a single industry to maintain a practice that has been banned in all other consumer lending because of its toxicity.
Given the FCA were fully aware of how the industry worked, and at the time endorsed the previous set up and actually implemented the current, if its now retrospectively deemed to be wrong, who is really at fault, should it be the Finance Houses paying any compo?
sugerbear said:
Any evidence of that other than the fact they didn't proactively investigate practices?
Depends on the level of evidence your wanting me to provide, its not something I have been deeply investigating, been quite busy, so I don't have any secret videos or the like?I think we can say on the balance of probability, given we are talking something like a 15 year period, they will have been in and investigated many motor trade and lenders businesses throughout those years.
In fact a glance through their final decisions will give you a list of all the businesses they have touched.
Random_Person said:
TUS373 said:
Letter back from Toyota Financial Services re a PCP I had back in 2016. They confirm that this deal WAS affected. Now got to wait until September.
It was a lazy purchase on my behalf, buying a newly released model so there was no discount on the price at all..I asked for best deal, was offered PCP and took it. In hindsight, I could probably have shopped around but it kept everything under one roof. I remember lots of paperwork. At end of 48 month PCP I bought the car outright paying the balloon.
I keep records on everything and Toyota were well organised in their response. The dealership in question has gone now. I think customers migrated away from them forcing them to close.
I must practice my compo face now.
How long to reply for Toyota? Its been 2 months now and nothing back from them.It was a lazy purchase on my behalf, buying a newly released model so there was no discount on the price at all..I asked for best deal, was offered PCP and took it. In hindsight, I could probably have shopped around but it kept everything under one roof. I remember lots of paperwork. At end of 48 month PCP I bought the car outright paying the balloon.
I keep records on everything and Toyota were well organised in their response. The dealership in question has gone now. I think customers migrated away from them forcing them to close.
I must practice my compo face now.
I had a response from seat finance saying it looks like it may apply to my deal in 2012, I'm sure it will I remember the business manager doing all sorts to try and make the deal for the sale girl at the time as I didn't want the extras (autoglym, warranty etc).
Email says they have a pause until September
Email says they have a pause until September
sugerbear said:
Any evidence of that other than the fact they didn't proactivley investiage practices?
Commission kickbacks were completely kosher under the FCA guidance for motor industry credit until about 2019 as was the ability of the car salesman to increase the finance rate charged as much as he wanted and thought the customer was dumb enough to pay and pocket the uplift entirely and the last review (the previous review quite some years early has wholly absolved the anomalous, legacy practices of the automotive sector). These practices had been banned years earlier in all other consumer debt markets because they are just fundamentally wrong and always heavily abused as being able to mark up always leads to vendors rinsing the dumb and the naive. The big change was when highstreet banks were finally banned from charging higher fees buried in their product pricing based on just how stupid the salesperson thought the punter was who had just walked in the banks door. You can't ever have a legitimate service where the person selling the object is also involved in selling the credit and vice versa, you can't ever allow those selling the credit to be involved in the selling of the product. The failure to regulate against that activity always leads to negative costs to the consumer, always. It's why it is not legal in the consumer debt industry and one really does have to ask the question as to why the FCA very distinctly endorsed and allowed the practice to persist amongst the second largest and the most lucrative consumer credit market? The previous consumer credit review which endorsed a practice banned everywhere else was decidedly er, 'weak' on its reasoning.
DonkeyApple said:
sugerbear said:
Any evidence of that other than the fact they didn't proactivley investiage practices?
Commission kickbacks were completely kosher under the FCA guidance for motor industry credit until about 2019 as was the ability of the car salesman to increase the finance rate charged as much as he wanted and thought the customer was dumb enough to pay and pocket the uplift entirely and the last review (the previous review quite some years early has wholly absolved the anomalous, legacy practices of the automotive sector). These practices had been banned years earlier in all other consumer debt markets because they are just fundamentally wrong and always heavily abused as being able to mark up always leads to vendors rinsing the dumb and the naive. The big change was when highstreet banks were finally banned from charging higher fees buried in their product pricing based on just how stupid the salesperson thought the punter was who had just walked in the banks door. You can't ever have a legitimate service where the person selling the object is also involved in selling the credit and vice versa, you can't ever allow those selling the credit to be involved in the selling of the product. The failure to regulate against that activity always leads to negative costs to the consumer, always. It's why it is not legal in the consumer debt industry and one really does have to ask the question as to why the FCA very distinctly endorsed and allowed the practice to persist amongst the second largest and the most lucrative consumer credit market? The previous consumer credit review which endorsed a practice banned everywhere else was decidedly er, 'weak' on its reasoning.
Or did they allow additional commission if the broker did more work than would otherwise be normal in the process of finding a lender? (and in most cases this didn't apply).
The latter is specifically mentioned in the two judgements against the finance companies. Also the lenders don't have a get out of jail card just because the FCA didn't proactivley investigate.
The FCA doesn't really issue rules per se but guidance which regulated firms then need to interpret. Some firms err on the side of caution while others will seek to interpret the guidance as wide as possible. If anything the actual issue here is one of agents. Agents will always push to the far side of what their fully regulated wholesale partner permits and the fully regulated entities have a tendency to turn a blind eye as they can claim the agent acted in breach of their house guidance if needs be. Which is why many other parts of the retail facing finance industry have steadily moved away from running agents under their umbrella.
What has essentially occurred here is that the agents were given permission by the lenders to apply their own mark up which would then be rebated back to them. In a perfect world this would be argued as logical as the agent knows the customer more and by loading the finance can give back in the asking but in practice that is never what happens which is why the activity has been banned everywhere else. The truth is that you simply can't allow the agent to determine the gross finance costs to the client and absolutely never when that premium is rebated back.
The FCA consumer lending review at the start of last decade did look at car finance but that really doesn't count for much as the FCA usually does these reviews by asking the major entities what they're doing and then basing their summation on that. It's not the case that the FCA is staffed with people who totally understand the market, in fact, the norm is all too often people who didn't know sufficient to retain private sector employment. Plus, until Brexit the FCA mainly worked by just waiting until ESMA or another overseas regulatory or enforcement body knocked on their door.
What has essentially occurred here is that the agents were given permission by the lenders to apply their own mark up which would then be rebated back to them. In a perfect world this would be argued as logical as the agent knows the customer more and by loading the finance can give back in the asking but in practice that is never what happens which is why the activity has been banned everywhere else. The truth is that you simply can't allow the agent to determine the gross finance costs to the client and absolutely never when that premium is rebated back.
The FCA consumer lending review at the start of last decade did look at car finance but that really doesn't count for much as the FCA usually does these reviews by asking the major entities what they're doing and then basing their summation on that. It's not the case that the FCA is staffed with people who totally understand the market, in fact, the norm is all too often people who didn't know sufficient to retain private sector employment. Plus, until Brexit the FCA mainly worked by just waiting until ESMA or another overseas regulatory or enforcement body knocked on their door.
ashleyman said:
I found all my paperwork for my finance from 2013.
Young and reckless. 14.5% interest. Sent that off to Barclays and as it was a used car from a supermarket type deal I’m sure that will come back positive.
Thanks Barclays.Young and reckless. 14.5% interest. Sent that off to Barclays and as it was a used car from a supermarket type deal I’m sure that will come back positive.
You’ve already provided all the information we need and we can confirm that a discretionary commission arrangement did apply to your motor finance agreement.
DonkeyApple said:
What has essentially occurred here is that the agents were given permission by the lenders to apply their own mark up which would then be rebated back to them. In a perfect world this would be argued as logical as the agent knows the customer more and by loading the finance can give back in the asking.
Just out of interest then, how do you expect the agent to be paid if it isn't out of the interest charged on the loan ?Presumably, the bank had a minimum it needed (say 5%) and the agent wasn't getting anything unless the rate was above that.
OddCat said:
Just out of interest then, how do you expect the agent to be paid if it isn't out of the interest charged on the loan ?
Presumably, the bank had a minimum it needed (say 5%) and the agent wasn't getting anything unless the rate was above that.
It can be fixed as it is elsewhere. Either a flat fee or a fixed percentage with the agent not granted any ability to change. Presumably, the bank had a minimum it needed (say 5%) and the agent wasn't getting anything unless the rate was above that.
But there should be no tied agents in the 21st century. The selling of finance should be wholly separate from the act of selling a car, not merged and manipulated against the consumer.
Why should a car vendor be selling finance and allowed to manipulate both RRP and funding so as to lock out competitive third party lenders? It's actually disgraceful that the practice was allowed to persist in the new car market. Can you just imagine if estate agents determined what mortgage rate was paid and what price for the property was paid?
The other aspect to consider is that if the current typical loan rate for a solvent consumer for a secured property loan is around 4.5-5% and the unsecured lending rate to the same consumer is currently around 5.5-6% why is it that for a secured car loan the rate to them is 12%, which is a junk credit rating figure? Or if the vendor is running a zero, how does the consumer actually know what rate they're being charged which as a lender is what makes implicit funding so lucrative and why it's actually banned in most markets. A large chunk of that 12% is the insane subsidising by the more solvent of the less solvent who you'd not lend to at rates anywhere near that level. The rest is excess profit from market manipulation against the consumer. VW, for example are issuing bonds into the market at under 4%.
The way it should work is that the consumer puts the requirement for funding out to the global and highly competitive lending market and receives offers for their business that are based on their income, wealth and risk profile and where all the lenders must compete against each other. The consumer then goes to the car shop and negotiates with the car salesperson on the price of the car. That salesperson cannot manipulate or trick with faux rewards such as the farce of the 'dealer contribution', can't extort the consumer with over priced captive and uncompetitive finance but simply has to compete on the price of the goods where their competition is the car dealer next door who has the same car but with a different badge and is also wanting to sell to the same consumer. They all need to compete against each other and only have the price of the goods, their own skill and the brand power to do so.
We also then don't have these new cars sitting on the manufacturers' balance sheet still belonging to them so they then cannot manipulate year three values because they do not have control of either the price of the goods nor the supply rate. No fields of cars manipulating used values against consumers.
The end result is a market where both new and used is free and determined by the consumer and the command economics of cars broken.
For years, dodgy used salesmen and subsidised credit junkies on PH have argued that selling credit legitimately to consumers would lead to higher car prices. A farcical argument from those who gained from the market manipulation but at least the recent Tesla example has shown the reality of how a free market works when the car vendor isn't also the bank and doesn't also retain the cars as assets on their balance sheet. The consumer pays a financing rate determined by their solvency not a number chosen by the car vendor and the car vendor has to drop prices to secure sales and can do so because they haven't retained ownership of sold cars using rigged house finance that requires them to manipulate year three future values against the borrower.
The only consumers that benefit from the current system of captive finance are the skint who wouldn't be lent such large sums in the free market because their risk rating was too poor and so they can get suppressed rates via the car vendor which are part paid for by everyone else. Hardly a great loss if they can't have a shiny new premium, non essential toy when it means everyone else pays fair value.
SmoothCriminal said:
Has anyone had bmw/mini send you a decision saying no hidden finance for a car you haven't even queried but then radio silence for the one you have?
I had 2 loans from Alphera but complete radio silence from the outset other than the auto reply. From the 5 loans with VWFS I heard back that on 3 of them no hidden agreements but to date nothing on the remaining 2.
I have chased both.
DonkeyApple said:
Why should a car vendor be selling finance and allowed to manipulate both RRP and funding so as to lock out competitive third party lenders?
....because it's a free country ?There was never anything to stop Joe Bloggs arranging his own finance with whichever lender he wanted and making an offer for the car. If the profit on the amount Joe was prepared to pay for the car equalled (or exceeded) the amount the vendor could achieve by combining the profit margin, and finance cut, for someone else for whom they were arranging a loan then I'm sure the car would have been theirs....
OddCat said:
....because it's a free country ?
There was never anything to stop Joe Bloggs arranging his own finance with whichever lender he wanted and making an offer for the car. If the profit on the amount Joe was prepared to pay for the car equalled (or exceeded) the amount the vendor could achieve by combining the profit margin, and finance cut, for someone else for whom they were arranging a loan then I'm sure the car would have been theirs....
Not quite right. The issue with the scenario is that when you walk in with your own money you don't get the same offer price on the car. That's the key to the jig and the issue with captive house finance. There was never anything to stop Joe Bloggs arranging his own finance with whichever lender he wanted and making an offer for the car. If the profit on the amount Joe was prepared to pay for the car equalled (or exceeded) the amount the vendor could achieve by combining the profit margin, and finance cut, for someone else for whom they were arranging a loan then I'm sure the car would have been theirs....
It's similar to the excuse that customers can step into the unsecured loan market post purchase and raise debt to pay off the house loan. We know as lenders that almost no one can raise unsecured borrowing of that size so cooling off rights don't trouble you.
The key to equitable pricing, transparency and eliminating over charging is to always segregate the finance deal from the purchase deal.
The question to ask is why does the car finance industry remain out of step in regulatory terms to other consumer finance regulations which have been cleaned up to remove these risks back at the start of the century? The clue to that answer lies in the lobbying power of the manufacturers finance houses.
As for the concept of a free country, that's not the freedom of lenders to manipulate but the freedom of consumers to pay a fair price and benefit from a free market not a command economy.
DonkeyApple said:
Not quite right. The issue with the scenario is that when you walk in with your own money you don't get the same offer price on the car. That's the key to the jig and the issue with captive house finance.
So you get the car cheaper if you take the dealer finance ? Is this not six of one and half a dozen of the other ? Does the price discount for taking the finance therefore not have to be offset against the discretionary commission refund ? Otherwise the buyer had the penny and the bun ? DonkeyApple said:
The key to equitable pricing, transparency and eliminating over charging is to always segregate the finance deal from the purchase deal.
This is a discretionary purchase ! There isn't any equitable element. It's like buying a washing machine. I'm sure various places sell the same machine at different prices and have different finance deals with different splits of who gets what. Caveat emptor and all that....
OddCat said:
DonkeyApple said:
Not quite right. The issue with the scenario is that when you walk in with your own money you don't get the same offer price on the car. That's the key to the jig and the issue with captive house finance.
So you get the car cheaper if you take the dealer finance ? Is this not six of one and half a dozen of the other ? Does the price discount for taking the finance therefore not have to be offset against the discretionary commission refund ? Otherwise the buyer had the penny and the bun ? DonkeyApple said:
The key to equitable pricing, transparency and eliminating over charging is to always segregate the finance deal from the purchase deal.
This is a discretionary purchase ! There isn't any equitable element. It's like buying a washing machine. I'm sure various places sell the same machine at different prices and have different finance deals with different splits of who gets what. Caveat emptor and all that....
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