Cost of car finance is probably only heading one way to help pay for this. |
In today’s article on vehicle finance in the Times, the head of FCA is saying compensation may mushroom.
The time for complaints is to be extended. This is going to be an issue for sometime unless the Supreme Court can apply the brakes in 6 months. |
Surely it is the FCA which regulates, but the courts are supreme and can in effect overrule the regulator.
Isn't that what has happened in this case ?
Thus, The banks were in effect misled by the regulator.
However, the regulator claims the banks were not following their fiduciary duty
in law.
Welcome to UK law. |
So who regulates, FCA or the courts? Sounds like it means the FCA are lacking and incompetent for not having had this covered. |
Unfortunately the court passed a judgment which went beyond FCA guidelines, which may now set a precedent. Hopefully the appeal will see sense. |
If no law is broken what is the case to answer under the law?
If no regulation is broken what can the regulator do? |
They haven’t broken the law, it’s all about transparency of commission paid, which was not openly disclosed? and in the court view, sufficiently explained to end clients by brokers. Ultimate lenders are deemed to be responsible for the actions of their brokers, To what extent will be the part of the appeal. In my opinion, yet more of a nanny state, with no responsibility taken by client, who surely should only cares about how much is payed monthly! If you don’t like the figure, don’t borrow the money. Obviously I say this within the protection of regulation. Such FCA regulations were no doubt followed, but the FCA are not the law and hence the issue here. |
It's most annoying as I find it hard to believe any company like Secure Trust Bank would have deliberately broken the relevant law or regulation at the time of the signing of the credit agreement.
There is a systemic issue here. |
I doubled down at 500 and I’m still bullish at 400. Risk is way overblown. STB looking at 4x upside in my opinion. |
If the authorities get this wrong there will be substantial damage to the vehicle financing market and overall cost increases. Just what that market doesn't need.
2025/6 will be very interesting, nationally, and possibly for all the wrong reasons. Potential for return of inflation and increased unemployment. |
P1nkfish,
That's the point with no numbers and the uncertainty this is a gamble.
It is in a sense a false market (not in that are being intentionally misled), it's just we don't have the information to make a rational judgement.
STB don't seem to feel they can advise us on impact.
Fund backers and Lord Lee seem to be heading for the exit or at least reducing holdings. |
Close Brothers update today. |
I think the oldest complaint went all the way back to 2014 so if this stands liability is for all car finance commission paid between 2014 and 2024, it is a small number in relative terms for the market but it is a potential huge liability for STB. Question is how many deals have they written during that time and what their average commission is. The latter is likely to be around £600 per deal, I'd need to have a dig around through 10 years of accounts to make an estimated guess at the former, its huge though. |
STB is a bit player in this.
Granted they are small so won't be able to carry the impact like Lloyds and bigger players can but their exposure is also relatively small.
Would be useful to have some numbers to help define the potential problem. |
Article in Times today states Moody’s putting the size of this scandal now at £30 billion. STB not mentioned in article.
Note, the size of the impact if any on STB still not known.
RNS from yesterday shows Farringdon capital has sold 1.5% of STB. |
Remember Equitable Life! :-| |
That’s not a given Red! The current judgement also potentially covers fixed commissions and not just undisclosed.
It’s a big unknown and we can only hope that common sense prevails with the final decisions. |
OMVI
I believe you mean the Supreme Court will rule against compensation were it was within FCA guidelines. |
I could not agree with you more OMVI- spot on. |
The whole industry had to stop issuing loans after the judgement. It’s not just STB. Honda wouldn’t allow people to pick up their cars for a week even on already agreed loans.
It’s just a huge unknown until the court of appeal judgement. I think it’s unfair to expect business to comply with FCA rules then tell them they owe compensation for something within the FCA guidelines. I can’t see how that’s appropriate and hope the court of appeal will rule against compensation where it was within FCA guidelines. |
The Appeal court extended the problem to undisclosed commission.
Secure Trust Bank stopped motor finance for a period while they reworked their offering.
Thus that suggests that they may be on the hook for undisclosed commission in the
past although we cannot be completely sure of that as the company is not exactly forthcoming as to it's new liabilities.
Added later
Note, we won't really know for another 6 months or so if the Appeal Court ruling will stand or not. |
Hi Supearich, I hope you are right in that the potential liability 'can only relate to a small(ish) % of those figures and NOT every transaction' - what is your rationale for concluding this though? I have worked in the car finance industry for the last 30 years and that is not the current generally accepted view in the industry, although we do indeed very hope it turns out that way. |
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