Member Info for CHELMOCHASER

But motor finance industry voices have argued that while, on paper, the ability for dealerships to set interest rates themselves looks bad, in practice it enabled better, more flexible deals for consumers in the vast majority of cases.

Adrian Dally, of the Finance and ­Leasing Association (FLA), said: “Ultimately, being blunt, the scale of this has been misrepresented.

“What the FCA is doing has been misrepresented. Motor finance providers, our members, have rejected most of those [complaints] because we consider what happened was within the rules.

“There’s a perception that what happened was lenders allowed dealers to raise interest rates to earn more commission. No, that isn’t how it worked at all, what goes up can come down. They had discretion to lower the rate. ­Ultimately, dealers wanted the [discretionary commissions] so they could bring down the rate in order to match what a consumer was offered elsewhere. The consumers benefited more than they lost from this discretion.”

Mr Dally said that discretionary commissions were “something we have been aware of for a long time. It’s not been secret, it’s been out there.”

It is a view shared by Dominic Threlfall, former managing director of Pebley Beach Group, a car dealership headquartered in Swindon, Wiltshire, who said discretionary commissions were a vital tool to stay profitable during his more than 30 years in business.

He said: “Did it happen? Yes. We did increase interest rates, but it wasn’t an insult. It was part of a package. When people buy a car they buy a package and the dealership will stack the package up.

“Each customer is different and that’s what [we] tried to do, to make a deal that fits the customer.

“We have customers coming in who may not have had 10pc deposits therefore we have to reduce their car prices down a bit. [So] what you would do is reduce the car price down, you might put the interest rate up a little bit to compensate for that.

“Because [dealerships] were earning more on commission that meant they could reduce the price of the car, or reduce the price of the trade-in car.

“Just by putting the interest rate up a little bit the customer has walked out with a much better package,” he said, arguing that the consumer may have to spend less cash up front.

“It probably cost the dealership a ­little bit of money to sell it that way”, he said. “Companies should not be crucified for that. It’s a package to buy a car. We’re not a nanny state, people are making an informed decision that they want to buy that car.

“I laugh almost at what is going on,” he said, adding “It is almost as if profit is a dirty word.”

Despite the motor industry’s protestations that the FCA’s intervention is a storm in a teacup, there are plenty who think car finance could result in large sums being returned to hundreds of thousands of customers.

How car finance scandal unfolded

Banks are setting aside huge sums against compensation – but dealers say they did customers a favour. By Noah Eastwood

The Vauxhall Zafira was one of the most reliable family cars ever to roll off the production line, so driving one home after paying just a fraction of the price must have felt like a steal.

That’s what Lisa King thought when she bought a new top-of-the-range Zafira in 2012. She paid a little under £14,000 upfront and financed £12,000 over five years in repayments of £279 a month. “It was a lot cheaper than the book price,” she said.

The catch? A whopping 12.7pc interest rate, at a time when the cost of borrowing was near record lows.

“We didn’t think anything of it,” despite an “excellent” credit rating at the time, she said. “When the salesman said we wouldn’t be able to match that price elsewhere, we said OK.”

Six years later, following a notice from the City watchdog in 2019, Mrs King, along with thousands of other drivers, discovered that their motor finance deals may not have been sold “subject to status”, which would have set interest based on a credit ­rating. Instead, it was at the whim of the dealership in roughly 40pc of cases, according to the Financial Conduct Authority (FCA). What is worse, car dealers, who act as brokers on behalf of lenders, in Mrs King’s case Black Horse (a division of Lloyds Banking Group), were incentivised to secure higher rates with extra cash.

The so-called discretionary commission arrangements were everyday practice at dealerships for decades. They played a role in millions of loan agreements and potentially led to consumers collectively paying billions of pounds over the odds for cars.

The commissions were banned by the FCA in 2021 but it was initially implied the ban would only cover new loans as opposed to historic claims.

But a landmark case in January, where the Financial Ombudsman ruled in favour of a case against Black Horse, has paved the way for thousands of new claims going back to 2007 to be heard. The FCA is now investigating whether to greenlight mass payouts, with a decision due in September. It found drivers paying up to £1,100 over the odds on a £10,000, four-year finance deal.

‘As dealerships were earning more commission that meant they could reduce the price of the car’

Many are already describing the unfolding situation as the “next PPI” and claims management companies will be smelling blood as major banks brace for a wave of payouts, including Lloyds, which this week said it had reserved £450m against possible compensation.

The total sum banks could be on the hook for is between £6bn and £16bn, according to estimates from RBC Capital, which will worry anyone with a stake in any one of the major FTSE 100 banks that could be implicated.

I still anticipate bond to be re paid in full however if it is rolled I would expect a v high rate to be offered to enforce this ie15+…

There would be a register available that lists the major % holders of the bond so yes be interesting to see the colour of it…i personally think b small chance the rol would happen but even if does be v attractive coupon…

Very good post baldmark

They need to be very careful.If bonds are not paid out in full in August, after paying a £6m divi, the capital markets will show no mercy to The Board and their advisers….

Not feeble tick….just a sensible view thank you all the same

Agree with your above comment…however they arrive at it I believe bond re paid in full , plenty of buyers of the bonds today with buyers paying 90 at the close of the play , great opportunity imo

Been steadily topping up to my existing position which purchased at issue…as I say secured debt 380 odd so even in liquidation which clearly won’t happen they have portfolio of 700mil so plenty to repay the bond with even in fire sale of assets-

Baldmark see my earlier post below from 19/2

BOND AUG’2419 Feb 2024 12:14

This a very strong buy-85 offered a bargain

1.won’t default plenty of options to pay this, 700 mil of property on books- bond 50 mil

2.roll the bond ( v unlikely) into a higher coupon ie 12+ and then bond still safe

3.even if co folded (won’t happen) receivers sell the assets and bond repaid in its entirety.

Been buying these from 86.5 down to add to my existing holdings- v happy to keep adding as 6 months investment for 18% upside plus the 2.25% interest, decent in anyone’s book.

Been calling it for 2 weeks it’s currently 87 offered- nailed on to get par in August plus 2.25 % dividend, easy trade here

I reiterate keep buying the bonds- only play in town

Thanks Mary I’ll take a look, already have sizeable position in SPT -great biz far too cheap

Another good trade I reckon WG see my earlier post

Sensible trade ….good level

Just topped up …love these pullbacks,need to look through all this noise very big opportunities here

Mary, not sure if you interested but just posted on the WG page, a very interesting play imo

been almost a year since the apollo bid @ 240 which was abandoned without explanation.

the business has stabilised and on a much sounder footing since then and has a very impressive order book with the potential of a reinstatement to the dividend list which the times touched upon after the last recent update .

i feel only a matter of time until either apollo has another go here or other candidates will come to the fore to take advantage of these very oversold levels.

i also note that david lockwood as been appointed to the board as a non executive director commencing 12th march, david has a very impressive track record-recently stabilising and growing bab**** to health besides selling cobham to a us private equity predator.

this company’s days of independence is numbered imo and a great opportunity here…

More covers than at Headingly….

Fitch etc non event no one cares about these d/g anymore it’s meaningless in the bigger picture-of course they’ll move the grade on a share price move line that-as Mary said if not for you then sell I’ll gladly take your loose stock- onwards and upwards

I wonder if Martin will bang on again about it tonight / this week in his show for his followers.

Sure has….no shock there…last of the series so was always going to have a last swing at it…750k complaints lodged so far….plenty of chancers in that figure

Good post syno very interesting, gonna buy more tomorrow in fact I like averaging up on momentum

Yes, i wonder if moneymule closed that short….more it rises the more those shorts panic…tbh they had their fun and should close out as this will gain momentum v quickly, I notice ML the condescending people’s champion has his last program in the current series on tonight so he probably has another dig tonight??