HUGE car finance update signals ALL mis-sold commission complaints could come under probe

dunstonh

This is going to be a long drawn out issue with some sites report billions in compensation claims what they should do is sort the ones that have already be established with DCA 

The problem is that that DCA was not banned by the FCA.  So, no wrongdoing took place under FCA rules.   The courts have taken a different view and a recent case has caused further issues.  

DCA can also be positive, neutral or negative.  So, not all types of DCA are bad.

As the FCA has to wait for the court cases, they cannot speed it up. Indeed, its looking more likely it will now be pushed back even further into 2026 or 2027.

 someone asked when do you think you will receive your compensation claim I said I don't know maybe in 2026 maybe even latter, we're dealing with big players in car fiance game who are not going to give up without a fight 

To be fair, you can see their point.    If you go into Tesco, you don't see a tin of beans listing the amounts paid to everyone in the manufacturing chain through to retail. You see the price on the tin.  The courts have taken the view that with car finance, you should see who gets what.      This is a legal opinion which will either lead to the law being changed due to unintended consequences or compensation paid out.  The fact the Treasury is now involved does hint that they are at least considering the legal side.    Normally the Treasury would leave it to the FCA.

As for dates, you are likely looking late 2026 or into 2027 unless the legal process is sped up or appeals are denied.

FooBlues38

I think what a lot of people misunderstand is the language within this. 

If you have a car garage, this will usually be a franchise so let's say VW. The garage buya the car from VW and it's then stock. The garage has a margin of discount to play with and still make a profit on the bonnet. 
The manufacturer will ask for so many cars to be sold during a set period and issue a bonus to the garage. 
This is all fine. 
The sales staff of course earn a commission for selling a car. Again no issue. 
The issue arises on two fronts. When a new car is sold, usually this will be done with a preferred finance lender from the manufacturer, a set commission will be paid to the garage. So let's say it's an APR of 4% and a commission is £100. Most people will probably feel that it's fair enough although it opens up the prospect that you're selling the finance when it might not be in the best interests of the consumer. 
The bigger issue tends to be on used cars and secondary finance deals where garages use a different lender, sometimes this can be a "sub-prime" lender. In these instances, the garage may offer a higher rate of interest at 7-12%+ and could be getting a significantly higher amount of commission directly to the garage (not the salesperson) for doing so.
As an example, John wants to buy a used Golf valued at £20,000. The dealership offers him finance at 9% APR and is getting paid £1,000 commission for this finance product. They could also offer John the same car at 7% APR and be paid £500 finance commission. The garage are still making the profit on the bonnet of the car being sold which is up to them to reduce as they see fit but they're in control of how much profit they make from the fuss, which the consumer was never made aware of.
Immediately after John buys his car, Michelle comes in and buys another car but gets a different interest rate based on the car she's buying. Maybe it's higher, maybe it's lower.
I believe this is the issue that John hasn't been treated fairly when the garage haven't disclosed their commission on the finance and John could've had a better deal, on a lower APR but was never told why he had to take the 9%. Michelle is treated differently for no reason other than to make a sale. So who's right?
No one expects sales staff not to earn a commission but garages earn significant sums from selling higher interest rates on finance products and if consumers were aware of the sliding scale of finance commission they'd have asked for lower rates of interest.

DullGreyGuy

FooBlues38 said:

I think what a lot of people misunderstand is the language within this. 

If you have a car garage, this will usually be a franchise so let's say VW. The garage buya the car from VW and it's then stock. The garage has a margin of discount to play with and still make a profit on the bonnet. 
The manufacturer will ask for so many cars to be sold during a set period and issue a bonus to the garage. 
This is all fine. 
The sales staff of course earn a commission for selling a car. Again no issue. 
The issue arises on two fronts. When a new car is sold, usually this will be done with a preferred finance lender from the manufacturer, a set commission will be paid to the garage. So let's say it's an APR of 4% and a commission is £100. Most people will probably feel that it's fair enough although it opens up the prospect that you're selling the finance when it might not be in the best interests of the consumer. 
The bigger issue tends to be on used cars and secondary finance deals where garages use a different lender, sometimes this can be a "sub-prime" lender. In these instances, the garage may offer a higher rate of interest at 7-12%+ and could be getting a significantly higher amount of commission directly to the garage (not the salesperson) for doing so.
As an example, John wants to buy a used Golf valued at £20,000. The dealership offers him finance at 9% APR and is getting paid £1,000 commission for this finance product. They could also offer John the same car at 7% APR and be paid £500 finance commission. The garage are still making the profit on the bonnet of the car being sold which is up to them to reduce as they see fit but they're in control of how much profit they make from the fuss, which the consumer was never made aware of.
Immediately after John buys his car, Michelle comes in and buys another car but gets a different interest rate based on the car she's buying. Maybe it's higher, maybe it's lower.
I believe this is the issue that John hasn't been treated fairly when the garage haven't disclosed their commission on the finance and John could've had a better deal, on a lower APR but was never told why he had to take the 9%. Michelle is treated differently for no reason other than to make a sale. So who's right?
No one expects sales staff not to earn a commission but garages earn significant sums from selling higher interest rates on finance products and if consumers were aware of the sliding scale of finance commission they'd have asked for lower rates of interest.

Your describing DCA @FooBlues38

The court has gone further and said that if John's dealer was going to get £500 no matter the APR of the finance that they had to be up front about the fact the commission is going to be paid to them. The weird bit of the ruling is that the fact the T&Cs which John signed to accept the finance had in normal size font in the middle of the general terms that a commission would be paid has been deemed insufficient. Effectively the court has said you can sign contracts and not be held to them because no one bothers reading them before signing. 

It's not that materially different from the car sale though, they could choose to lower the price by sacrificing their commission, just as with DCA the seller could give up commission for a lower APR. Surely if the customer has a right to know that for finance the dealer is getting a fixed £500 then they should also know that they're getting a £1,500 fee for selling the car which again could be reduced to reduce the selling price. 

Tarian

What is the problem with hidden commission ?
Surely the end cost to the buyer is the priority ?

Dealer A tells me that the APR is 7%.

Dealer B tells me that the APR is 8%

I am sufficiently numerate to confirm the monthly payment in each case is correct.

Naturally I buy the car and finance through Dealer A

Later I learn that Dealer A got £300 (finance) Commission, while Dealer B would have got £200.

Knowing the Commission amount would not have changed by purchase decision.
Aside from curiosity - why should I care ?

The biggest worry from this Court case is the cost of extra compliance in all sorts of businesses...
....and guess what - those costs are "hidden".

On second thoughts....
Perhaps Supermarkets should be required to publish the price they pay farmers - and all the other middlemen !

DullGreyGuy

Welcome to Financial Services where everyone is deemed to be unable to make their own judgements. 

You dont even have to go to Supermarkets though, should the car dealer not have to say how much the car is costing them? Particularly in the secondhand market one could have gotten a car for £7,000 and selling it for £9,000 whereas the other dealer got their equivalent for £5,000 from a grieving widow who didnt know any better but have put it up for £10,000.

In the insurance industry we've had to separate fees and premiums for years (causes arguments) and also disclose commissions on request but in our world there can be close relationships between insurer and seller such that profit shares etc exist so unless the customer wants to come back in 3-4 years time we dont know the actual amount of commission that will be paid. 

bugz69

Advice please

I am a London cabbie and have my own Black cab which I purchased just over 5 years ago on finance. The finance company that was used is called Black horse.

I understand that the mis-selling doesn't apply to business users but is there any way that my situation could be within the criteria as I the vehicle was for both business and pleasure and I was sold the vehicle through the exact same procedure as a car and indeed financed through one of the main companies under scrutiny?

nanagg

Had this from VW finance today. Do I just leave it until after the Court hearing in May or do I need to log a formal expression of dissatisfaction, so it becomes a formal complaint at this stage?

"After reviewing our records, we can confirm that there was no DCA in place between us and the credit broker relating to your finance agreement. Based on your request, we understand that this is the only information you required to fulfil your Data Subject Access Request.  Therefore, we now consider your request resolved

Furthermore, as there was no DCA in place in relation to your agreement, we haven’t treated your communication as a formal expression of dissatisfaction and have not raised a formal complaint on your behalf."

Nasqueron

nanagg said:

Had this from VW finance today. Do I just leave it until after the Court hearing in May or do I need to log a formal expression of dissatisfaction, so it becomes a formal complaint at this stage?

"After reviewing our records, we can confirm that there was no DCA in place between us and the credit broker relating to your finance agreement. Based on your request, we understand that this is the only information you required to fulfil your Data Subject Access Request.  Therefore, we now consider your request resolved

Furthermore, as there was no DCA in place in relation to your agreement, we haven’t treated your communication as a formal expression of dissatisfaction and have not raised a formal complaint on your behalf."

What are you trying to achieve?

You didn't have DCA so you were not miss-sold.

You can't do anything until the courts decide what they are doing with general commission as that one looks like being killed off by the treasury

nanagg

I know I wasn't miss-sold a DCA, my point was should I make a formal complaint now, as a fail safe (ahead of the May Court hearing) about general car finance commission, or just leave it till we know the full scope of potential miss-selling post May.

dunstonh

nanagg said:

I know I wasn't miss-sold a DCA, my point was should I make a formal complaint now, as a fail safe (ahead of the May Court hearing) about general car finance commission, or just leave it till we know the full scope of potential miss-selling post May.

It doesn't matter which you do as no-one is going to look at it until late 2026 at the earliest.