Which is exactly what the article says. They're considering new primary legislation. Which, like any primary legislation, would need to pass through parliament.
Rachel Reeves considers overruling supreme court in £44bn car finance scandal
- Thread starter Tram
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This is all fine and dandy. Retrospectively applying it? There could be argument when the liability falls on the public purse but in this case it is entirely commercially private, come on eh.
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But to get peopel let off from something tjat hurt the public, whol are the ones that voted them in.
Keep moving the goal post for some, while others have to stick to the law. So the law favours the wealthy.
The issue with the Car Finance side is that the interest rates were not decided on the customer's personal circumstances (unless they went Sub-Prime).
The finance companies provided agreements to the car dealers and gave them a range of finance rates that they would allow the dealer to charge out at. For example:
Base Rate of 4% and upto 10%
The issue is that the interest rate had NOTHING to do with the customer's credit profile and risk. The dealer essentially set the rate as high as they could get the customer to agree on a payment. Example - If a customer said £300 is too much, they would lower the rate a little until the customer said "ok, £260 I can do".
This is where the mis-selling was being done. Had the interest rate been set based on a proper credit and risk review of the customer, they it would be different but it was simply being set at whatever monthly payment the dealer could get away with in order to inflate their commission from the finance companies.
Sub-Prime business tends to be a little different as the Sub-Prime finance company tend to decide the rate based on a proper credit check and risk report. If a customer is deemed a high risk of default, then the interest rate increases. This is to protect the lender as they essentially get back more of the capital loaned out by the time the customer potentially defaults.
The finance companies provided agreements to the car dealers and gave them a range of finance rates that they would allow the dealer to charge out at. For example:
Base Rate of 4% and upto 10%
- The dealer can now apply an interest rate of between 4% and 10% (and under if they wanted to - see next point)
- If the dealer charged out at under 4% (base rate) then the dealer would have a subsidy applied i.e. they would have to pay the finance company to go with that rate
- If the dealer charged at base rate, the finance company would pay the dealer a nominal fee
- If the dealer charged over base rate then the finance company would pay the dealer commission. This commission was based on the rate applied and the amount of finance e.g. £8000 borrowed at 8% would get more commission than £8000 at 6%
The issue is that the interest rate had NOTHING to do with the customer's credit profile and risk. The dealer essentially set the rate as high as they could get the customer to agree on a payment. Example - If a customer said £300 is too much, they would lower the rate a little until the customer said "ok, £260 I can do".
This is where the mis-selling was being done. Had the interest rate been set based on a proper credit and risk review of the customer, they it would be different but it was simply being set at whatever monthly payment the dealer could get away with in order to inflate their commission from the finance companies.
Sub-Prime business tends to be a little different as the Sub-Prime finance company tend to decide the rate based on a proper credit check and risk report. If a customer is deemed a high risk of default, then the interest rate increases. This is to protect the lender as they essentially get back more of the capital loaned out by the time the customer potentially defaults.
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A few points:
1. The Supreme Court has not yet handed down its judgment, so you don't know what it's going to say, and nor does anyone else.
2. The Court of Appeal effectively said that more clarity on the state of the law was required. See the final paragraph of its judgment - https://www.bailii.org/ew/cases/EWCA/Civ/2024/1282.html. This is exactly when the legislature should step in and act.
3. If the Supreme Court does find against the car finance industry, it could have implications for *any* credit agreement with a commission (including many mortgages / mortgage brokers, for example). It could tank the entire economy and spark another crash a la 2008. Lloyd's alone have been recommended to place about £3.5 billion aside to deal with the issue. It's estimated that damages for affected parties relating to car finance will be something like £800-1200. A major financial crash would cost the average household far more than that. It's right that the government balances what's right (that financiers don't profit at consumer expense) with overall economic risk that could be far more damaging to everyone in the country.
4. You're conflating the law with the legislature. The Supreme Court will rule on its interpretation of the law as it stands. Parliament is entitled to change that law. That's Parliamentary sovereignty, and is *exactly* how or democracy works and has done for centuries. You seem to be advocating a system in which the highest authority is an unelected Judge - you're the person pushing something undemocratic.
Soldato
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Ruling is due later today. Be interesting to see what the outcome is, and if it is ruled that the claims can go ahead how far that reaches.
www.bbc.co.uk
Car finance ruling has potential to trigger millions of claims
The Supreme Court's decision due later could pave the way for millions of drivers to claim payouts.
www.bbc.co.uk
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Soldato
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The SC has rejected the government's attempt to intervene:
BBC said:
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What exactly does 'it also wanted the motor sector to be able to continue "supporting millions of motorists to own vehicles"' mean?
I don't recall the motor sector ever supporting me in owning a vehicle, if anything they've been money pits.
I don't recall the motor sector ever supporting me in owning a vehicle, if anything they've been money pits.
My court appearance was stayed being so close to the ruling. Hopefully the SC decision will mean I don't have to go back a second time, and it'll just get sorted outside of the courts for everybody. I have about 6 cars on my list.Ruling is due later today. Be interesting to see what the outcome is, and if it is ruled that the claims can go ahead how far that reaches.
Car finance ruling has potential to trigger millions of claims
The Supreme Court's decision due later could pave the way for millions of drivers to claim payouts.
More bat tunnels please!
Caporegime
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I have real mixed feelings on this one. I'm in scope for a potential claim, but there's a floodgates argument here and the economic impact of the claims will just bite consumers in the arse via inflation. I know that's not a reason for letting car finance crooks break the law, but it just feels 'off'.
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I understand the point, but there is a fairness argument here. Where financial recompense is deserved, it should be irrelevant what the secondary impact may be. This, in part, is why I despise any sort of retrospective action. Commercial and private entities need to feel that hurt; it is necessary to leverage change in behaviour for future endeavours.
I am equally annoyed at the UK Government for interfering when it is an entirely commercial matter with no public liability
Lenders may have to set aside more cash for claims, lenders then can't lend as much as a consequence. Car market absolutely depends on availability of credit otherwise it'll collapse and that will be a big economic hit.
Be interesting how this affects main dealer financing. 10 years ago dealers on CarWOW would offer a discount on the financed car above that of the cash payment car because of the kickback they got from the finance company. I know a few people who went down this route then paid off the finance in full during the cooling off period which meant the dealer didn't get the kickback, some dealers even saying it wasn't possible to cancel finance during the cooling off period to prevent this from happening. The interest rate on some models was 4.9% compared to 0% they were offering on the majority of the range.
is it significant enough to kick through onto mortgage rate (even if trump and usa economy will more likely have an impact)
e: r4pm has to drag useful warm body of Martin Lewis in for his manic preaching, like greg jackson's frequent participation - hopefully they pay bbc for the advertising.
the price of cars will go up on the forecourt due to reduction in discounts of rrp they might otherwise offer
e: r4pm has to drag useful warm body of Martin Lewis in for his manic preaching, like greg jackson's frequent participation - hopefully they pay bbc for the advertising.
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Fair point, thanks for the clarification.