Secure Trust Bank Share Discussion Threads

[future financier] 30/10/2024 15:04

Just look at PPI for a precedent. It started out as a massive fraud by the banks against their borrowers. It ended up as an even greater fraud by the public (and their CMCs) against the banks - and the FCA/Government turned a blind eye to this as it was politically expedient to do so. So the fact that most of the banks are innocent in relation to this will not protect them from the tidal wave of claims driven largely by CMCs and their all too willing clients.

[johnhemming] 30/10/2024 13:03

The point, however, is that if when someone is entering into a contract they are told things that are not true then this is potentially a form of fraud.

[p1nkfish] 30/10/2024 11:06

How did he find out it was a bad deal? He must have read the contract afterwards. Why not before then?

We all make mistakes but this reads as a problem with the customer if all parties applied the prevailing law at the time.

[johnhemming] 30/10/2024 07:44

This is the judgment



The unusual case on disclosure is that of Johnson and these clauses are relevant:

The Suitability Document and the Dealer Terms of Business
153. In the course of summarising the facts of the Johnson case earlier in this judgment, we
referred to the “Suitability Document…Proposed for Mr Marcus Johnson” which was
prepared by the dealer, the Trade Centre Wales. Its material terms are set out at [46].
As we observed at [47], the document is untruthful in a number of important ways.
154. First, the hire purchase agreement which was being offered by the lender was certainly
not the most suitable for Mr Johnson’s requirements. It was inadequate to fund the
purchase because he was required to pay far more than the Glass’s Guide price for the
car. This transaction could only be achieved by an additional personal loan of
£1,595.31. The proceeds of that loan were, in effect, required in order to pay the dealer
the commission of £1,650.95. If that commission had not been payable, Mr Johnson
would have been able to fund the purchase at the actual Glass’s Guide price using the
hire purchase agreement which the lender offered.
155. Secondly, as in Mr Wrench’s case, the Dealer Terms of Business with FirstRand
contained clause 2.1 (set out at [39] above) which tied the dealer in to giving it a right
of first refusal. It is probably no coincidence that the Trade Centre Wales did not refer
to clause 2.1 of these terms in the Suitability Document. It is notable that there is no
contractual obligation in the “Rates and Terms” agreed between the dealer and the
lender that the dealer was required to disclose this contractual tie between them. This
is an omission of a key fact which is a suppression of the truth.
Judgment Approved by the court for handing down. Johnson v Firstrand Bank Ltd (t/a Motonovo Finance)
40
156. A reasonable reader of the parts of the Suitability Document described at [46] above
would conclude that the dealer would canvass the “select panel of lenders” on behalf of
the applicant and then “advise on” the result and “provide an illustration of the
Consumer Finance product that best meets your individual needs”. Nothing of the sort
took place. In fact, what happened was that a single quote was obtained for an
arrangement which was very disadvantageous to Mr Johnson (who was paying far more
than the car was worth, as the DDJ found on the facts), and very beneficial to the dealer.
Mr Johnson, as the DDJ found and as the dealer must have known, did not read any of
the documents and did not understand what a very poor deal he was getting. That might
be his fault, but he is hardly alone in dealing with complex legal documentation in this
way, and the Consumer Credit Act protection exists in part for this reason.

[cfro] 30/10/2024 07:30

Link to FT article here:

[p1nkfish] 29/10/2024 20:23

Give up - can't post the link. Some more background on moneysavingexpert.
All up in the air until May 2025 unless shot down sooner.

[hnicholls3] 29/10/2024 20:10

Top article in the FT this evening - lenders meeting Treasury / regulator. The read across to business in other sectors is huge. Positive is maybe we will have a clearer idea of where we stand sooner rather than later as it touches so much more than the original ruling.

[buffett4] 29/10/2024 16:51

The lenders did not see it coming that is certain. Imagine following the FCA's rules to the letter (which they all to my knowledge did) and then being told that those rules were potentially incorrect. Its been a real shock to everyone in the industry and was predicted by not a single lender that I know of. The crazy thing is that now the new rules are clear it is not a problem to disclose commission to the customer, just a bit of additional paperwork to get consent.

[cousinit] 29/10/2024 16:42

Given the likes of Honda have withdrawn finance from their dealerships until new procedures and documentation are put into place, I'm not at all sure that the industry did see this coming.

This feels closer to branded store cards and credit cards where the finance was provided by an external party and (presumably) the store took a commission. I'd imagine there are a lot of historic contracts being reviewed rapidly across a variety of intermediated finance products.

[deanowls] 29/10/2024 16:25

I think the bigger issue is that if it’s car finance the where there’s blame there’s a claim guys go next? Season tickets? Finance purchase on anything.

Seems to me at the moment there’s a claim for anything. However stb need to get ahead of this. Surely they knew it was going through and should have figures available.

[cousinit] 29/10/2024 14:28

Having bought two used cars in the last decade, it was quite clear that the preference had changed to finance rather than cash, which tells you something about the sticker price on the car. I guess not that many people had that kind of conversation...

Retrospective gold plating seems to be a specialty in UK financial services.

[buffett4] 29/10/2024 13:46

Totally agree with your summation of the current position.

[hnicholls3] 29/10/2024 13:32

Thanks for the clarification. Sounds like a waiting game. You would think common sense would prevail given the scale of commission arrangements across all sectors and that they seem to be retrospectively moving the goalposts.
That said, even if common sense does prevail, it will be many months before knowing which isn't great.

[buffett4] 29/10/2024 13:16

So discretionary commission is where the dealer could increase the interest rate to earn more commission and you are quite right that STB only have a low level of potential liability in this regard. However, this judgement relates to all commission. So say a lender pays a flat fee commission regardless of interest rate, this was outside the scope of the FCA investigation however it is unfortunately within the scope of this judgement. Potentially a big problem for every car finance lender unless common sense prevails and it can somehow be reversed or mitigated against. Very unfair to the industry.

[hnicholls3] 29/10/2024 12:58

From research STB only was active in the Discretionary Commission Agreements from 2014-17 (ish) and it accounted for mid single digits % of their total vehicle finance loans.
Seems the reaction is quite harsh given these numbers but perhaps I'm missing something...

[buffett4] 29/10/2024 12:43

I work within the car finance industry and the way I understand the situation is as follows. The industry regulator, the Financial Conduct Authority, laid down rules in relation to commission disclosure. The rules meant that lenders/brokers/dealers had to disclose that there was a commission payable and that the customer could ask for the exact amount of commission if they wished. By and large the industry followed the rules set out by the regulator. This new court case has effectively set a precedent with changed rules, where by the judges have unanimously concluded that the customer had a right to know and consent to the exact amount of commission before entering in to the transaction. The judges also set out the remedy where this has not happened as compensation to the customer equal to the commission amount plus interest. The effect is that the entire car finance industry has been following one set of rules, for them to get changed retrospectively. The potential liability of the lenders (since the judges ruled they are effectively jointly liable for this commission disclosure) is I am afraid large. This seems grossly unfair to the industry and as such I hope that the Supreme Court will overturn this decision and if not one wonders whether there is the potential for a claim against the regulator (and effectively the UK government). The way I understand this is that it is not just a car finance issue but could relate to any type of financial services eg insurance etc and therefore The ramifications are huge. Please DYOR and don't rely on this information.

[lookagain] 29/10/2024 11:48

Car salesmen have always said they prefer customers to buy on HP because they make more money that way.

And you might be surprised with the number of customers who ask how much will it cost per month and are interested in nothing else.

[cfro] 29/10/2024 09:23

That is a really good point jimbox1. Mustn't forget that the bank is only providing the loan it is not privy to any conversation between the motor dealer and it's customer.

Massive over-reaction here i feel but this is an illiquid stock and not a good time to be realising bad news two days before the budget.

[jimbox1] 29/10/2024 08:56

Who received the commission? Shouldn't the responsibility for disclosure rest with the motor dealer? If compensation is to be paid, shouldn't the motor dealer pay it (as he received the money). After all, the negotiations with the customer are conducted by the motor dealer salesmen.

[davidosh] 29/10/2024 08:45

smithie6....Maybe it is not a case of 'Do you think they know? and more a case of 'Should you know exactly how much they are receiving so you make an informed decision on the right deal and whether there is a reason for the hard sell ?

[smithie6] 28/10/2024 17:09

perhaps the appeal should present data from a street survey, for the public's reply to these questions

1) Do you think a mortgage broker gets a commision from the real provider of the money ?

2) Do you think an insurance broker gets a comission from the insurance company providing the insurance policy ?

3) Do you think a car dealer providing a finance deal for a client buy a car gets a comission from the company providing the money ?

------

imo 90%-100% of the public will imo give a "yes" to all 3 questions

.....and hence the appeal against the recent court sentence would win.