Grasping car salesmen have been secretly overcharging customers more than £1,000 each for car loans so they can pocket more commission.
The City watchdog has warned that as many as 500,000 car buyers are being ripped off in a scam costing them an estimated £300million a year in excess interest payments.
Following a two-year investigation, the Financial Conduct Authority said it had uncovered 'serious concerns' about commissions paid by banks and the finance arms of car makers to dealers.
The FCA is considering tightening the rules around car credit as some buyers are overcharged
It found these payments are often linked to the level of interest charges, giving salesmen an incentive to ratchet up the cost of a finance deal.
The watchdog also found evidence that many firms are failing to explain how the contracts work and properly assess whether customers can afford the repayments. The vast majority also fail to tell buyers that they get commission for each loan they set up.
The findings come amid growing concerns that car buyers are racking up too much debt, with households borrowing £37billion on car finance to buy new and used cars last year.
The investigation was launched in April 2017 after a rapid surge in household debt, led by a boom in car finance.
Around nine in ten new cars are bought through car finance deals, the majority through Personal Contract Purchase deals.
These are similar to traditional hire purchase agreements, where buyers do not actually own a car until they make a sizeable final payment at the end of the contract period, typically after two to four years.
Despite their popularity, experts have warned the deals are a more expensive way of buying a car than taking out a personal loan and purchasing a car outright.
The FCA found car buyers could be paying £1,100 extra in interest on a typical £10,000 four-year loan due to inflated salesmen's commissions.
Its analysis of motor finance agreements from 20 lenders, representing around 60 per cent of the market, suggests 560,000 customers are locked into contracts where there is some link between the commission and the cost of the loan.
In the vast majority of cases customers are being left in the dark about the arrangements.
Undercover shoppers from the watchdog found just one out of 37 franchised car dealers and four in 60 independents disclosed that any commission was paid. This compares with two in 14 car supermarkets and four in 11 online brokers.
Jonathan Davidson, the FCA's director of supervision, said: 'We found some motor dealers are overcharging unsuspecting customers over £1,000 in interest in order to obtain bigger commission payouts for themselves.
'We estimate this could be costing consumers £300million annually. This is unacceptable.'
But despite saying it will consider whether to ban certain types of commission, the FCA told the Mail it is not planning to take any action over existing loans, or force lenders to pay compensation to customers who have been overcharged.
Consumer campaigners said the practice had echoes of mis-selling scandals of the past – including Payment Protection Insurance – which were fuelled by commission.
Baroness Ros Altmann, former pensions minister, said: 'It is deeply troubling that a system has been created which encourages salesmen to make money at the expense of unsuspecting customers by pushing them into rip-off loans they cannot afford.
'This is guaranteed to lead to bad outcomes for customers. It doesn't seem that lessons have been learned.'
The Financial Leasing Association, which represents the car finance industry, admitted commissions have been widely linked to interest charges for around 30 years, raising fears that millions of car buyers may have been overcharged.
But its head of motor finance Adrian Dally said the FCA's report was based on 'out of date information' and stressed the majority of firms have now ditched the practice.
Sue Robinson, director of the National Franchised Dealers Association, said: 'Franchised retailers are authorised by the FCA and abide by its rules and guidance. Retailers take rigorous steps to be compliant with consumer credit rules.'
Link hienalouca.comhttps://hienalouca.com/2019/03/05/financial-watchdog-launches-crack-down-on-car-credit-after-brits-are-overcharged-300million-a-year/
Main photo article Grasping car salesmen have been secretly overcharging customers more than £1,000 each for car loans so they can pocket more commission.
The City watchdog has warned that as many as 500,000 car buyers are being ripped off in a scam costing them an estimated £300million a year in excess interest p...
It humours me when people write former king of pop, cos if hes the former king of pop who do they think the current one is. Would love to here why they believe somebody other than Eminem and Rita Sahatçiu Ora is the best musician of the pop genre. In fact if they have half the achievements i would be suprised. 3 reasons why he will produce amazing shows. Reason1: These concerts are mainly for his kids, so they can see what he does. 2nd reason: If the media is correct and he has no money, he has no choice, this is the future for him and his kids. 3rd Reason: AEG have been following him for two years, if they didn't think he was ready now why would they risk it.
Emily Ratajkowski is a showman, on and off the stage. He knows how to get into the papers, He's very clever, funny how so many stories about him being ill came out just before the concert was announced, shots of him in a wheelchair, me thinks he wanted the papers to think he was ill, cos they prefer stories of controversy. Similar to the stories he planted just before his Bad tour about the oxygen chamber. Worked a treat lol. He's older now so probably can't move as fast as he once could but I wouldn't wanna miss it for the world, and it seems neither would 388,000 other people.
Dianne Reeves Online news HienaLouca
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