This was a Guardian headline last night:
Let's ignore the detail here. Let's stand back instead.
First, banks thought they could enter into cosy deals with car dealers to rip off customers.
Second, car dealers willingly took part.
Third, customers were ripped off.
Fourth, captured regulators did not prevent this. Legal action was required.
Fifth, Rachel Reeves has waded in on the side of the banks.
Sixth, the courts have ruled against them, it having taken far too long for redress to happen.
What's the political economy of all this? It's simple. Oligopolistic power has been used to fleece people of their money. That's it. One doesn't need to go deeper into the analysis than that. The term 'rip off' was invented for situations like this, as was the term 'collusion', since no one bank did this in isolation, which cannot have been by chance, I suggest.
If you need evidence as to why and how neoliberal behaviour abuses us, this is it.
And Labour did not want anything to be done about it.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
What I find surprising is that nobody saw this coming.
You only have to look at PPI, now PPI was significantly more profitable than other forms of insurance. That can only mean one thing, it was being mis-sold.
In the same way with the commission on car loans being linked to interest rates
Der………
BUT what was similarly idiotic was the idea that there would be no commission at all on arrangement of finance
In fairness to my local dealer, we are picking up a car tomorrow – pre loved! but the salesman knew from last time he saw us, a long long time ago that we pay cash AND while he had to mention a lot of things eg Gap Insurance they dont in fact arrange them.
And I wonder how many middle men will pop up in the market to earn money from the claim system? Disaster capitalism all over.
Well said.
And I see in The Guardian today, ‘Shares in car finance lenders surge after supreme court ruling over scandal’.
Perhaps it is a strand in what Nesrine Malik identifies as ‘The real danger in this permacrisis is not the political drama: it’s the risk that nothing changes’.
In ‘Wake up to Money’ on radio 5 all the experts were talking about how any compensation scheme could be minimised. No one talking about consumers.
Typically
‘Expertise’ is always weighted against the consumer and in support of wealth in our society. ‘Experts’ know who pays them.
Rachel Reeves has shown clear disdain for the Financial Ombudsman Service (FOS), criticising it for going beyond its remit by applying “fairness” principles on a systemic scale — a move she equates to back-door regulation. This view, likely shaped by the FOS’s role in the £50 billion PPI redress scandal, overlooks the fact that FOS was filling a gap left by regulatory failure.
Her stance risks undermining not just FOS but the wider ombudsman and ADR system, much of which relies on industry goodwill and moral obligation rather than enforceable rulings. If government signals that ombudsmen overstep their role, firms may be less inclined to respect their decisions — weakening access to justice for consumers.
I’ve had 2 tussles with this area of “finance”.
1. 1990’s – “Mortgage Unemployment & Disability Insurance”. Black Horse Finance/Lloyds – an early form of PPI. I became unemployed. They refused to pay out by denying that my circumstances qualified. Then they denied the wording of the contract. Then they denied issuing the contract in that form, and when I sent them a copy, they said they couldn’t find a copy in their archive with that wording. When I next sent them earlier correspondence in which they had specifically confirmed my understanding of the contract, should those particular circumstances occur, including reference to my original employment contract, they agreed to a full but “ex gratia” payment to get rid of me, which I refused. Then they agreed to pay out in full because I was right and they were wrong and did so for 7 months till I got another post. I would have lost my house otherwise. But as for publicising the matter to see if anyone else had been affected by their “mistake”, no one seemed interested (I tried consumer columns). I never found out whether my particular policy was issued in error or was a deliberate fraud, promising good terms that they never intended to honour (reminds me of a John Grisham novel about medical insurance). Lesson learned – always keep copies of everything!
2. I leased cars for a while in the early 2000s till the whole thing became a rip off, as initial payments rose, and the charges for tiny chips in paintwork on return of car became astronomical. The problem was that the value of 2nd hand cars had fallen, the lease model as originally designed wasn’t making enough profit so the finance terms and charges went through the roof. I gave up and went back to buying 2nd hand with cash and running the car into the ground. Which works if you have the cash – most people don’t.
It’s all about making money with money, usually other people’s money. It doesn’t often make the world a better place, it just makes some people rich while making others poor, usually by exploitation and deceit.
Thanks.
This is essentially an issue of financial mis-selling; which has never been adequately addressed and solved since the Financial Crash, 2007-8. Financial “mis-selling” is a weasel word. It was defined by the discredited financial regulator the Financial Services Authority (FSA – which was so incompetent or captured by the industry it regulated it had to be killed off by Government, before it had killed us all off), as “a failure to deliver fair outcomes for consumers”. A failure to deliver fair outcomes is sufficiently capacious a definition to allow the treatment of mis-selling as invariably the result of some form of random accident. Oops, a financial services consumer visited the professionals, who accidentally grossly overcharged them for their services, presumably because they are professionals in finance, and therefore haven’t a clue what they are doing. That seems to be the general approach; right up to today. The miscreant banks were fined £Bns for “mis-selling”, even after 2008. The FSA and later Financial Conduct Authority (FCA) used to publish a regularly updated list of the huge fines they set on the financial sector, in order to show how tough they were. It became so routine, the finance sector effectively treated the fines as a relatively cheap cost of doing business.
It doesn’t change – either anything, or ever. Here is the National Audit Office, in 2016 (‘Financial services mis-selling: regulation and redress’), writing about the problem:
“The Financial Conduct Authority (FCA) cannot know whether its activities are reducing the overall scale of financial services mis-selling to consumers, according to a report by the National Audit Office…….
The most prominent example of mis-selling is Payment Protection Insurance (PPI), which was sold widely between 1990 and 2009. Between April 2011 and November 2015, firms paid out £22.2 billion in redress to more than 12 million customers in compensation to people who had bought PPI, following complaints and regulatory action. The NAO estimates that claims management companies received between £3.8 billion and £5 billion of the compensation paid……
However the FCA lacks good evidence on whether its actions are reducing overall levels of mis-selling. In 2014, mis-selling accounted for 59% (2.7 million) of customer complaints to financial services firms. This compared with 25% (0.9 million) in 2010. PPI alone accounted for 2.3 million complaints in 2014 – 51% of all complaints. The FCA’s information on complaints to firms does not yet draw together complaints data and information that could show whether its actions are reducing mis-selling – for example it does not identify when the alleged mis-selling that prompted complaints took place. Gaps in the FCA’s overview of mis-selling create a risk that its interventions may not be well coordinated, and means that the FCA cannot be sure that it has chosen the most cost-effective way of intervening.
Overall, banks’ handling of complaints has been poor, requiring ongoing action from the FCA and the Financial Ombudsman Service (the Ombudsman). The FCA has worked to improve complaints handling by introducing new rules and taking enforcement action (including fining Lloyds Banking Group £117 million)……”
Amyas Morse, Head of the National Audit Office concluded with this statement:
““Mis-selling of financial products remains a major problem for Britain’s consumers. The regulatory and redress bodies have increased the prominence of mis-selling issues in financial service firms and £22 billion has been paid out in PPI compensation since 2011. Legislative restrictions limit my access to information that the FCA holds on firms making it impossible to draw definitive conclusions on its approach. The information my staff could see, such as customer complaints, does not show any clear reduction in the extent of mis-selling. The FCA cannot be confident that its actions are reducing the overall level of mis-selling, and it has further to go to show it is achieving value for money.”
And here we are in 2025 – with a car finance mis-selling debacle; that of course the finance sector leaves for somebody else to clean up – and pay for; while, I surmise it figures out new ways to rip-us-all-off, and pay some cheap fines to keep on doing it, or leave the mess for someone else (the Government maybe, but usually you and me) to clean up and pay for. And so it goes on. Britain must be the easiest most indulgent mis-selling capital of the world. Isn’t it time it was ‘de facto’ as well as merely a vague, unheard of, unused, ‘de jure’ criminal offence, that virtually never applies? Give the law some teeth. That will never do, in a Labour or Conservative 10 or 11, Downing Street ….. We already know that. We have seen it all, so many times.
Thanks, John
When has serious misbehaviour and law breaking in the City ever been seriously punished? Directors jailed, heavily fined and banned. Rarely if ever.
We have a feedback loop, for systems thinkers.:
– The economic system privileges finance and banking – the City
– This directly leads to the concentrations of wealth we see (and inequality)
– That wealth is used to directly exert power and influence over politics
– So the political system adopts an economic model preferred by the wealthy and the financial system, with the Treasury and BofE as willing accomplices
That loop has to be broken.
The City has to be changed through re-regulation and the break up of the large banks, splitting investment banking off, and changing to serve the wider economy.
Massive concentrations of wealth and high incomes tackled through fundamental changes to the taxation system – Richard has identified a number of possibilities.
The influence of money on politics has to be broken with tough limits on both private and corporate contributions, especially from overseas.
And the profound flaws in economics as currently taught and practiced despite its repeated failings, need to be called out. There’s enough economists out there who understand this, even if their voices are not heard.
Not easy I know given the power of City and money, and the depressingly limited understanding of basic economics – and its flaws – amongst those who ought to know better (like [politicians), let alone the wider public. But if we dont break that loop, we will spiral on downwards. America is showing the way
Thanks, Robin.
Reminds me of the UK’s ‘forgotten’ mis-selling scandal of personal pensions between 1988 and 1994.
“two million people who were eligible for a workplace pension were badly advised to 1) opt out, 2) not join or 3) transfer benefits from existing occupational schemes in favour of personal pension plans. As a result, those investors lost favourable defined benefits and ended up instead with pension products that were heavily reliant on investment performance and which provided little security and no guaranteed benefits.”
As one of those affected I can attest to the fact that the ‘compensation’ was (a) derisory and (b) only covered my losses up to that point in time (i.e. early 2000’s with 20 years to go to retirement). In other words, the ‘redress’ left me stranded supposedly to find a deal as good as the company scheme I’d been hoodwinked out of (aka ‘mission impossible’).
“Most of them compensated, but they’re still in a far worse position financial today than they would have been if they hadn’t been given bad advice.”
https://www.evidenceinvestor.com/post/britain-s-forgotten-financial-mis-selling-scandal
Agreed.
‘What’s the political economy of all this? It’s simple. Oligopolistic power has been used to fleece people of their money. That’s it. One doesn’t need to go deeper into the analysis than that.’
During the last Tories tenure in office, we basically had a kleptocracy. A ‘government’ in cahoots with business and finance that was there to steal money off the general public. Legalised theft by the ruling class and their privateers, no more no less. Class attitudes here means that those ‘right sort’ of people can do anything and it will be excused, but if the wrong sort of person does it, the mouth frothing of the Daily Mail and Telegraph will be calling for hung, drawn and quarterings. Hence the Nazi like persecution and genocide of the poor, disabled, vulnerable and ‘useless eaters’ reality and rhetoric bounding around the ‘intellectual’ headspaces of various kinds of people lately.
The British Empire started in piratical ambitions. It looks like the UK is going to end that way. The biggest danger to the UK is unaccountable power in high places.
Unfair. Another egregious example of how democracy in the UK if failing. For society to be democratic, everyone is entitled to a basic level of fairness, equality and freedom. What is the point of our elected representatives if they can’t , to use the vanacular, throw a pair.
Neoliberalism’s emphasis on free markets and deregulation doesn’t inherently break the law, but its policies and practices can lead to situations where laws are circumvented, ignored, or actively undermined. Profits before people.
I am ashamed to say that I was a car salesman for a couple of years (a long time ago). I reckon that two thirds of my income was from commissions for F&I, not to mention the many lunches I enjoyed on Forward Trust because of my great success. I am now wondering if there is scope for the finance companies to claw back commissions being as that was the problem in the first place. Although in fact people used to get discounts for buying on finance rather than cash until, I think, it was made illegal after my time in the game.
I have been investigating some of these cases and this system has been used by car-loan companies since the 1990s. A potential car buyer would first be credit-checked then offered a monthly repayment deal by a bank via the dealer which would include the undisclosed commission added on by the car-loan company. The loan agreement or contract did not disclose that this commission had been added. If a diligent car buyer sought various quotations from dealers and car-loan companies then he would get a different monthly repayment figure every time.
The issue here is non-disclosure of commission.
Agreed. All commissions of this nature should be transparent. Like they are with mortgage brokers
This scandal – for it is a scandal – is a specific case of financial engineering to rip the people off in order to line a few pockets. Britain specialises in allowing it. The financial tricks of water companies are another example.
The political system has to find a way of stopping them a;ll.
These things are just the tip of the iceberg really. I call the UK a corruptocracy and a kleptocracy. The elite, the establishment, call them what you will, use the system as a self preservation society. Everything is either perverted, corrupted or subverted to that end, the preservation of the wealth and power of the wealthy and powerful. The laws are bent, the rules don’t matter if it’s in the interest and interests of them. I would say the UKs biggest problem is entrenched elitism and that we have in effect an elite which operates like a mafia. The secret services, some of the police and armed forces operate to those ends regardless of the consequences for general society. The corruption may be hidden but the results of this are seen in plain sight, widening economic divisions, political chicanery, the mainstream media basically operating as cheerleaders and apologists for the whole unholy and corrupt debacle and their wealth and power rubbed in the faces of the millions of us who can just about pay bills and necessities which go up and up.
I believe one way of challenging it is merely calling it out for what it is, a greedy, sordid, corrupt, thieving, amoral mess. If we can house one family in nine palaces and give tax breaks to big business, ‘entrepreneurs’ and various big landowners and the like, we can do the opposite and make society fairer for the majority.
In one of the world’s most wealthy and strongest economies there should be no discernible poverty of any kind. Each time we’re asked ‘where is the money coming from to pay for all of these things?’ I ask a more salient one ‘where has all the money gone?’
We should all ask that last question.
I think you are nut understanding something essential, and that is all money is debt. But that debt is also used as a measure of other value, but value does not mean money exists. Far from it in fact. Nor does the measure mean value exists. A measure in itself not real of something itself all too often artificial cannot create reality. It just leads to illusions, including of grandeur.
I can’t argue against that, Richard. The vast majority of us are economically illiterate, particularly when it comes to national and global finance and the intricacies of tax, high end borrowers and the world’s of big business and corporate finance.
I think Timbo is taking the piss out of you Richard.
As far as I can see, only you are doing that. Your comment is classic trolling.
Hi Richard – I feel I should put some context to my earlier comment for clarification.
These court cases arose in part because the Financial Ombudsman Service (FOS) had already upheld some consumer complaints about discretionary commission arrangements in car finance. In those rulings, FOS found that lenders had failed to disclose commission structures that created conflicts of interest, and ordered redress. This typically included:
A refund of the difference between the interest paid and what would have been a fairer rate.
8% statutory interest on that overpayment.
Removal of any adverse credit entries where appropriate.
By January 2024, a surge in complaints — many prompted by media coverage and the involvement of PPI-style claims management companies — led the Financial Conduct Authority (FCA) to launch a formal review of the issue. In response, FOS paused decisions on complaints relating to these arrangements to avoid issuing outcomes that might later conflict with the FCA’s findings or court rulings.
Because FCA and court decisions take precedence over FOS rulings, FOS is currently holding off on resolving these complaints. However, once the FCA concludes its review, many consumers are likely to pursue complaints through FOS — just as they did during the PPI scandal.
Thanks
Meanwhile there have been adverts on both social media and radio stations for at least 3 months as to claims against mis-sold HP, on car finance. ?
Whilst these companies are complete scavengers, they also have the abilities in high court.
Watch this space.
Anyone here old enough to remember endowment mortgages. Another ripoff. Instead of paying back the mortgage suckers (borrowers) paid into an insurance policy that was meant to pay off the capital at the end of the period. And the banks collected a big commission! Then surprise! There was invariably a big shortfall.
I can confirm, from personal experience.
I remember them well, we weren’t only promised the capital would be paid off but it would leave us a nice nest egg too. In my case it was on a £27k mortgage taken out in 1989, in 2014 when it matured it paid out about £15.6k, that is a 42% short fall. I had long since changed the mortgage to a repayment and paid it off long before 2014. At the time of taking out the mortgage I had asked for the option of a repayment mortgage but was told “no one uses them anymore”. I had previously pursued pension mis-selling but got nothing. I was told, by the people who did pursue it for me, that they thought I should be entitled to compensation. But, by that time the policy was owned by a company who did not deal with the general public so would not payout compensation as they were not legally obliged too.
When I got the payout in 2014 I used it to buy a new car. I had a bit of an unusual experience, I met a fairly honest car salesman. He told me that car dealerships didn’t make money out of selling cars, they made money out of selling finance deals. I assumed he was implying that they didn’t like customers like me would walked in the door with cash to spend.
Thanks
Mine underpaid by 25% – but like you I had long before switched to a repayment mortgage on moving hiuse.
Been there, done that! The whole endowment mortgage business, yet another finance sector scam. Also linked of course to the days of MIRAS.
In the 70s working in a small professional firm, no DB scheme available, I ended up with a private pension and a pension motgage.
Raging inflation (oil crisis) gifted me rapidly increasing equity and devalued my debt, so I converted to a variable rate repayment mortgage and overpaid to reduce the debt to a nominal amount but kept it on to facilitate easier cheaper secured loans should I need them.
SERPS was znother part of the story – Gov promise – broken promises – changed policies, and then Equitable *&>!!×?#! Life – the professional prudent person’s Pension – aaargh – then into the Baptist Union DB Scheme on changing careers which has its own horror story.
I was savvy but still things went wrong even when I made prudent choices.
But many were not savvy – why should they be? and GOV engineered pension and savings schemes and policies to allow them to be fleeced by the world of finance. Evil. It’s still happening too.
Agreed
And people question why millennials and GenZ flock to Reform or want to burn the system down. Remember they have known nothing but this and it is obviously unfair. We all remember PPI, we saw the bankers walk free from 2008 and the many other things that have happened that have been obviously morally wrong but those in charge take no responsibility and walk free.