Car finance - hidden commission payments
Discussion
pavarotti1980 said:
OddCat said:
Disgusting. A retailer setting their own margin Salesman deciding his own levels of commission
To be fair, I do think that making people signing these agreements while having a gun held to their heads was out of order.
FTFYTo be fair, I do think that making people signing these agreements while having a gun held to their heads was out of order.
How much commission do you think a dealership should earn ?
OddCat said:
Okay, so who then IS supposed to decide the level of the dealerships finance commission ?
How much commission do you think a dealership should earn ?
With mortgages it’s set by the lender isn’t it? It’s been a little while since I used a financial advisor but I do remember their commission being clearly defined. It certainly shouldn’t be at the salesman’s discretion How much commission do you think a dealership should earn ?
OddCat said:
Okay, so who then IS supposed to decide the level of the dealerships finance commission ?
How much commission do you think a dealership should earn ?
I have no idea but for the sales staff to amend the APR to increase the commission they receive from the finance company is not the correct way. How much commission do you think a dealership should earn ?
I don't care how much they earn as long as the whole process is transparent and the customer is aware of whether they have received the best rate from the finance company and not have it inflated without their knowledge so Jack can buy a new shiny suit
OddCat said:
Do you know by how much Sainsbury's inflate the price of a tin of beans they obtained from Heinz ? Are you upset that they don't disclose this ?
The FCA aren’t responsible for how much profit Sainsbury’s make on Heinz beans ( btw always buy them from Costco as they probably half the price anyway ) and the consumer isn’t being treated unfairly and non - transparently in their purchase. As you know the FCA made hidden commission agreements illegal in 2021 in any event.
Whether this means any Lender will be made to actually repay higher than possible interest rates is the debate.
alscar said:
OddCat said:
Do you know by how much Sainsbury's inflate the price of a tin of beans they obtained from Heinz ? Are you upset that they don't disclose this ?
The FCA aren’t responsible for how much profit Sainsbury’s make on Heinz beans ( btw always buy them from Costco as they probably half the price anyway ) and the consumer isn’t being treated unfairly and non - transparently in their purchase. As you know the FCA made hidden commission agreements illegal in 2021 in any event.
Whether this means any Lender will be made to actually repay higher than possible interest rates is the debate.
I agree that those who entered into any such agreements AFTER the FCA ruling in 2021 should be compensated.
OddCat said:
Well, if the FCA WERE responsible here then they didn't do much of a job of exercising that responsibility between 2010 and 2021 did they ?
I agree that those who entered into any such agreements AFTER the FCA ruling in 2021 should be compensated.
2007 is the first year mentioned as being potentially affected but if they are responsible from then until 2021 then yes agree. I agree that those who entered into any such agreements AFTER the FCA ruling in 2021 should be compensated.
But doesn’t mean that consumers should necessarily “ suffer “ because of this.
OddCat said:
DonkeyApple said:
The lender quoted a fair rate for the risk they were taking and then allowed the agent sitting between them and the client to add on whatever they liked for themselves
Disgusting. A retailer setting their own margin.To be fair, I do think that making people signing these agreements while having a gun held to their heads was out of order.
So, sit down with the records of an agent who was acting under the umbrella of a lender's license and with commercials from a lender that allowed them to apply a discretionary mark-up and start to see variations in what that mark-up was per client, then cross reference to that individuals then credit records in the same file and you've got something that's been walking and looking a lot like a duck, especially if that mark-up is more than a couple of hundred basis points.
Now, we, as financial professionals, know for an absolute fact that when you have agents under an umbrella who have a contract that allows them to set a mark-up then some of those agents will have been ripping punters off.
Search and you will find. And if you find a few then you know there are more and this is the point at which the regulator will typically decide to not invest in finding every bad actor but instead enact an across the board penalty for the industry.
So if they decide to do a search do we think that A they will find that car salesmen have been acting more scrupulously than any salesman has ever before or B the car sales industry can get third time lucky in lobbying for their not to be a proper search?
But they all knew this was a thing. The banks, the dealerships, the FCA. And a fair number of the punters although, even if they didn't, they must have realised here was something in it (the arranging of finance) for the dealer. Unless they thought he was doing it out of charity.
Only those hidden commissions after 2021 should be refunded.
Only those hidden commissions after 2021 should be refunded.
OddCat said:
But they all knew this was a thing. The banks, the dealerships, the FCA. And a fair number of the punters although, even if they didn't, they must have realised here was something in it (the arranging of finance) for the dealer. Unless they thought he was doing it out of charity.
Only those hidden commissions after 2021 should be refunded.
How would the punters have known about hidden commission agreements ?Only those hidden commissions after 2021 should be refunded.
I had various agreements over that time for various reasons and with varying types of agreement.
Some were regulated some were not and some I let run to expiry and some I paid off quickly.
In some cases the interest rates were particularly cheap and if I was assured it was the best rate they could do I signed up on that basis.
In some cases there was also a finance contribution.
But was I lied to ?
Of the 9 agreements , one is not applicable ( unregulated ), 3 definitely didn’t have a DCA ( the lender has confirmed ) , 1 definitely did and for the other 4 am still awaiting confirmation or otherwise.
OddCat said:
But they all knew this was a thing. The banks, the dealerships, the FCA. And a fair number of the punters although, even if they didn't, they must have realised here was something in it (the arranging of finance) for the dealer. Unless they thought he was doing it out of charity.
Only those hidden commissions after 2021 should be refunded.
It is actually relevant that the industry and regulator know that tied agents were allowed to apply a mark-up. What's pertinent is whether the industry acted within their obligation of requirements such as TCF when doing so. Only those hidden commissions after 2021 should be refunded.
So, a vendor that set a fixed mark-up of a prudent amount would typically be deemed to have been acting in accordance with the expectations of their behaviour. Ie a dealer who set a fixed 200 bp mark-up on all transactions regardless of the client would be meeting those expectations. The dealer can't have different rates for different clients as interest charges are risk defined and the risk has already been priced by the lender not via any mark-up. And 200bp would generally be seen as a fair mark-up, not at all excessive.
However, a lender who didn't stipulate at least a maximum mark-up will have left themself open to a charge and very much should have known better as we all fully understand how agents operate and that as the regulated lender any failure of the agent pushes back onto us. To not head off such a simple risk displays an abject failure in basic compliance. It's a known risk that has to be removed via the contractual terms.
But in addition to that, an agent simply cannot differ their mark-up between clients and expect to remain on the right side of the regulators guidance. And that is key here, the regulator issues guidance and the regulated firms have the responsibility to ensure their interpretation of that guidance falls clearly on the correct side. They don't set specific criteria etc as many may believe. So, an agent who has been setting their mark-up per client is almost certainly going to be found by the regulator to have been acting against the best interests of their client, failing in TCF and subject to a reprimand.
Maybe a simple way to look at this is your Sainsbury's tin of beans. It has no price. Leslie, the chap on the till has been told by Sainsbury's that they will keep 20p but whatever he can mug off the punter on top of that is his. The customer takes it to the till where Leslie looks at the customer, makes a guess as to how f
king stupid they look and makes up a price for the tin of beans of 50p. Consumer law prevents that for very obvious reasons. What we have here is a sanctioned financial activity of agent mark-ups that while out of line with all other forms of consumer activity and where it had already been banned in other forms of retail lending, had FCA guidance as to how it was to be interpreted. Some retailers, quite possibly most, will have set fixed mark-ups at fair and easily justifiable levels. Both we absolutely know for an absolute fact that others will have been robbing punters blind via the medium of those customers being ignorant, desperate, stupid or just bamboozled.
The latter is hugely prevalent in car debt transactions because the vendor as well as being free to manipulate the interest rate on the debt can also manipulate the faux RRP. A practice completely outlawed in almost all other consumer facing activities and for extremely obvious reasons. Few people actually understand any of this stuff and it is piss easy to offer the average punter £500 with one hand while lifting £2k from their pocket with the other.
And because car selling financial regulation was left unchanged when this activity was banned everywhere else we know that it has been absolutely rife as well as wholly overt. So overt that it even has a brand, 'dealer contribution'. Obviously there is absolutely no 'contribution' taking place
It's merely a trick to get the more costly house debt product sold. Anyway, we will see if the FCA actually does what it should have done nearly 20 years ago and whether they bring this industry inline with the rest of the market.
OddCat said:
Do you know by how much Sainsbury's inflate the price of a tin of beans they obtained from Heinz ? Are you upset that they don't disclose this ?
If different checkout workers at Sainsbury’s were charging different amounts for the beans based on getting a cut for themselves and on whether they thought the customer could afford it and would notice then your comparison might be vaguely relevant but it’s not as it stands.DonkeyApple said:
OddCat said:
But they all knew this was a thing. The banks, the dealerships, the FCA. And a fair number of the punters although, even if they didn't, they must have realised here was something in it (the arranging of finance) for the dealer. Unless they thought he was doing it out of charity.
Only those hidden commissions after 2021 should be refunded.
It is actually relevant that the industry and regulator know that tied agents were allowed to apply a mark-up. What's pertinent is whether the industry acted within their obligation of requirements such as TCF when doing so. Only those hidden commissions after 2021 should be refunded.
So, a vendor that set a fixed mark-up of a prudent amount would typically be deemed to have been acting in accordance with the expectations of their behaviour. Ie a dealer who set a fixed 200 bp mark-up on all transactions regardless of the client would be meeting those expectations.
Perhaps the FCA will say 'all amounts over 200 basis points must be refunded'. They'll have to really because if they say 'firms who charged a flat 2% for all clients' is okay (regardless of non explicit disclosure) they can hardly then say to a firm that charged 2% for some and 3% for others 'you've got to give it all back'
There are claimants out there who think they are getting it all back which is clearly ridiculous. It is only 'excessive' amounts that should be refunded.
OddCat said:
...which brings us back to the question 'how much was reasonable'.
Perhaps the FCA will say 'all amounts over 200 basis points must be refunded'. They'll have to really because if they say 'firms who charged a flat 2% for all clients' is okay (regardless of non explicit disclosure) they can hardly then say to a firm that charged 2% for some and 3% for others 'you've got to give it all back'
There are claimants out there who think they are getting it all back which is clearly ridiculous. It is only 'excessive' amounts that should be refunded.
Unfortunately, they way these things tend to work is that a standard 'penalty' is applied pretty much across the board. The real culprits will pheonix and walk away and for the others it is often cheaper anyway than going through all the records and calculating exact amounts. Perhaps the FCA will say 'all amounts over 200 basis points must be refunded'. They'll have to really because if they say 'firms who charged a flat 2% for all clients' is okay (regardless of non explicit disclosure) they can hardly then say to a firm that charged 2% for some and 3% for others 'you've got to give it all back'
There are claimants out there who think they are getting it all back which is clearly ridiculous. It is only 'excessive' amounts that should be refunded.
What would be fair would be to absolve a vendor who never once deviated from a fixed premium whether to the north or south. The regulator could add that caveat pretty safe in the knowledge than none will apply for such an exemption.
The slightly more interesting question is whether, of this were to happen, whether they'd extend it to include third party specialist lenders as they've been having an absolute field day re mug premiums. Some of the rates I've seen plonkers taking on 'special' cars has been absolutely comedic, even for blokes with mortgages. It's also a potential can of worms due to 'introducers' getting a cut!!
DonkeyApple said:
Unfortunately, they way these things tend to work is that a standard 'penalty' is applied pretty much across the board. The real culprits will pheonix and walk away and for the others it is often cheaper anyway than going through all the records and calculating exact amounts.
What would be fair would be to absolve a vendor who never once deviated from a fixed premium whether to the north or south. The regulator could add that caveat pretty safe in the knowledge than none will apply for such an exemption.
The slightly more interesting question is whether, of this were to happen, whether they'd extend it to include third party specialist lenders as they've been having an absolute field day re mug premiums. Some of the rates I've seen plonkers taking on 'special' cars has been absolutely comedic, even for blokes with mortgages. It's also a potential can of worms due to 'introducers' getting a cut!!
A friend of mine bought a used Astra at 29.9% in 2009. Now that must have been some commission!What would be fair would be to absolve a vendor who never once deviated from a fixed premium whether to the north or south. The regulator could add that caveat pretty safe in the knowledge than none will apply for such an exemption.
The slightly more interesting question is whether, of this were to happen, whether they'd extend it to include third party specialist lenders as they've been having an absolute field day re mug premiums. Some of the rates I've seen plonkers taking on 'special' cars has been absolutely comedic, even for blokes with mortgages. It's also a potential can of worms due to 'introducers' getting a cut!!
I’ll give you one guess what that bloke used to do for a living?
djc206 said:
A friend of mine bought a used Astra at 29.9% in 2009. Now that must have been some commission!
I’ll give you one guess what that bloke used to do for a living?
Probably sI’ll give you one guess what that bloke used to do for a living?
t all commission. Sounds like a sub prime lender and they pay a fixed commission generally as the business they write is normally awful. I’ve experienced £50-£250 max over the years with some lenders actually wanting money from the dealers (subsidy) for sorting the customer out. Most money was made with John & Mabel being bumped up from 10.9 to 11.9% APR. The dealer will have had a base rate of say 10.9 and got paid a 5% commission, bumping someone to 11.9% and they got the whole extra 1% of the money lent. Used to be pretty easy.
One finance company used to have a ‘pencing’ button where you could toggle a payment up or down in 1p increments, so you would run the deal, and if it was £249.02 you could just pence up the payment to £249.99 and it would alter the rate in the background. Dealer gets all of the extra 97p over the whole agreement.
The Rotrex Kid said:
Probably st all commission. Sounds like a sub prime lender and they pay a fixed commission generally as the business they write is normally awful. I’ve experienced £50-£250 max over the years with some lenders actually wanting money from the dealers (subsidy) for sorting the customer out.
Most money was made with John & Mabel being bumped up from 10.9 to 11.9% APR. The dealer will have had a base rate of say 10.9 and got paid a 5% commission, bumping someone to 11.9% and they got the whole extra 1% of the money lent. Used to be pretty easy.
One finance company used to have a ‘pencing’ button where you could toggle a payment up or down in 1p increments, so you would run the deal, and if it was £249.02 you could just pence up the payment to £249.99 and it would alter the rate in the background. Dealer gets all of the extra 97p over the whole agreement.
Well someone made a killing, shame it wasn’t the guy that managed to sell that st all commission. Sounds like a sub prime lender and they pay a fixed commission generally as the business they write is normally awful. I’ve experienced £50-£250 max over the years with some lenders actually wanting money from the dealers (subsidy) for sorting the customer out. Most money was made with John & Mabel being bumped up from 10.9 to 11.9% APR. The dealer will have had a base rate of say 10.9 and got paid a 5% commission, bumping someone to 11.9% and they got the whole extra 1% of the money lent. Used to be pretty easy.
One finance company used to have a ‘pencing’ button where you could toggle a payment up or down in 1p increments, so you would run the deal, and if it was £249.02 you could just pence up the payment to £249.99 and it would alter the rate in the background. Dealer gets all of the extra 97p over the whole agreement.
t box at that price because he had ably demonstrated his ability to sell anything.97p/month? £35 over a typical agreement was a night at the pub back in the day.
djc206 said:
The Rotrex Kid said:
Probably st all commission. Sounds like a sub prime lender and they pay a fixed commission generally as the business they write is normally awful. I’ve experienced £50-£250 max over the years with some lenders actually wanting money from the dealers (subsidy) for sorting the customer out.
Most money was made with John & Mabel being bumped up from 10.9 to 11.9% APR. The dealer will have had a base rate of say 10.9 and got paid a 5% commission, bumping someone to 11.9% and they got the whole extra 1% of the money lent. Used to be pretty easy.
One finance company used to have a ‘pencing’ button where you could toggle a payment up or down in 1p increments, so you would run the deal, and if it was £249.02 you could just pence up the payment to £249.99 and it would alter the rate in the background. Dealer gets all of the extra 97p over the whole agreement.
Well someone made a killing, shame it wasn’t the guy that managed to sell that st all commission. Sounds like a sub prime lender and they pay a fixed commission generally as the business they write is normally awful. I’ve experienced £50-£250 max over the years with some lenders actually wanting money from the dealers (subsidy) for sorting the customer out. Most money was made with John & Mabel being bumped up from 10.9 to 11.9% APR. The dealer will have had a base rate of say 10.9 and got paid a 5% commission, bumping someone to 11.9% and they got the whole extra 1% of the money lent. Used to be pretty easy.
One finance company used to have a ‘pencing’ button where you could toggle a payment up or down in 1p increments, so you would run the deal, and if it was £249.02 you could just pence up the payment to £249.99 and it would alter the rate in the background. Dealer gets all of the extra 97p over the whole agreement.
t box at that price because he had ably demonstrated his ability to sell anything.97p/month? £35 over a typical agreement was a night at the pub back in the day.
I remember a colleague taking £2500 finance commission (for the company not personally) out of a deal once. He got 20% (you used to get paid on your penetration % so the more you sold, the better. Wasn’t uncommon to stop selling a week before the end of the month if you’d hit your target and your finance pen was right, a cash deal could drop you under and cost you £XXX. Silly times really.
The Rotrex Kid said:
That’s just an example of what happened, you started by saying ‘how much are you hoping to pay’ and ending up just over that amount, then a little bit more with the pencing.
I remember a colleague taking £2500 finance commission (for the company not personally) out of a deal once. He got 20% (you used to get paid on your penetration % so the more you sold, the better. Wasn’t uncommon to stop selling a week before the end of the month if you’d hit your target and your finance pen was right, a cash deal could drop you under and cost you £XXX. Silly times really.
Sounds like a really broken system.I remember a colleague taking £2500 finance commission (for the company not personally) out of a deal once. He got 20% (you used to get paid on your penetration % so the more you sold, the better. Wasn’t uncommon to stop selling a week before the end of the month if you’d hit your target and your finance pen was right, a cash deal could drop you under and cost you £XXX. Silly times really.
OddCat said:
Do you know by how much Sainsbury's inflate the price of a tin of beans they obtained from Heinz ? Are you upset that they don't disclose this ?
I don't care because Doris on the checkout isn't changing the price and pocketing the difference. Slight difference between a profit margin and a sliding scale of commission depending on how greedy sales person feels
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