The Supreme Court has blocked Rachel Reeves from helping lenders fleece car buyers.
The Chancellor of the Exchequer had tried to intervene in an appeal by finance firms after the Court of Appeal ruled that it was unlawful for lenders who back finance agreements on car sales to pay a commission to a dealer without a customer’s consent.
The court had said that when customers were not informed of the arrangement they should be compensated, leading to estimates that the industry could be forced to pay out as much as £30 billion.
Reeves stepped in – to protect the lenders, rather than customers – because she thought the size of the compensation bill for lenders could undermine the competitiveness of UK banks, and may stop the motor industry from offering finance agreements that help motorists buy cars.
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The issue here is that the situation as it stood before the Appeal Court’s decision provided an incentive for a buyer to be charged a higher-than-necessary interest rate – and Reeves’s intervention would have supported such rip-offs.
Here‘s the BBC with some background:
In 2021, the Financial Conduct Authority (FCA) banned deals in which the dealer received a commission from the lender, based on the interest rate charged to the customer.
Since January, it has been considering whether compensation should be paid to people who had these deals before 2021.
That has created the prospect of banks and other lenders having to make payouts totalling millions of pounds.
Some analysts estimate the bill could end up being the largest compensation scheme linked to financial products since the payment protection insurance (PPI) saga.
Of course, the prospect of having to pay compensation could have unintended consequences, with lenders looking for ways to recoup lost revenue elsewhere, potentially harming customers.
This is a drawback of having a national constitution that allows anything – except those things that are made illegal; businesses can subject customers to any kind of contract they want, as long as no laws exist against it, leaving them with the option of either accepting a deal that takes more money from them than is reasonable – or getting no deal at all.
As a representative of the government, Reeves should have been standing up for the customer – against business practices that were calculated to cause financial harm.
Instead, she came down on the side of big business, supporting those who should be able to take the financial loss they have incurred upon themselves, rather than those who have lost money that (in many instances) they really can’t afford to do without.
The answer to the issue is the old adage that prevention is better than cure. If lenders and dealerships had been subject to conditions that meant they were not allowed to charge higher-than-necessary interest, then the current situation would not have arisen.
If you think back to the financial crisis of 2008 onwards, the same adage applies; if banks had been forbidden from selling unsafe financial packages, they would not have incurred the enormous debts they did.
Sadly, the Labour government of the day had relaxed regulatory burdens on the banks – actually facilitating the crash (although it is the banks themselves that must bear responsibility for causing it).
If the lenders and car dealerships fall into financial difficulty, or even fail, because of their own greed, then it will be their fault. Other businesses will rise to replace them.
If I had the money to start one up, I might have a go. “Ethical auto finance” could be a real growth industry in the near future.
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Court has blocked Rachel Reeves from helping lenders fleece car buyers
The Supreme Court has blocked Rachel Reeves from helping lenders fleece car buyers.
The Chancellor of the Exchequer had tried to intervene in an appeal by finance firms after the Court of Appeal ruled that it was unlawful for lenders who back finance agreements on car sales to pay a commission to a dealer without a customer’s consent.
The court had said that when customers were not informed of the arrangement they should be compensated, leading to estimates that the industry could be forced to pay out as much as £30 billion.
Reeves stepped in – to protect the lenders, rather than customers – because she thought the size of the compensation bill for lenders could undermine the competitiveness of UK banks, and may stop the motor industry from offering finance agreements that help motorists buy cars.
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
The issue here is that the situation as it stood before the Appeal Court’s decision provided an incentive for a buyer to be charged a higher-than-necessary interest rate – and Reeves’s intervention would have supported such rip-offs.
Here‘s the BBC with some background:
Of course, the prospect of having to pay compensation could have unintended consequences, with lenders looking for ways to recoup lost revenue elsewhere, potentially harming customers.
This is a drawback of having a national constitution that allows anything – except those things that are made illegal; businesses can subject customers to any kind of contract they want, as long as no laws exist against it, leaving them with the option of either accepting a deal that takes more money from them than is reasonable – or getting no deal at all.
As a representative of the government, Reeves should have been standing up for the customer – against business practices that were calculated to cause financial harm.
Instead, she came down on the side of big business, supporting those who should be able to take the financial loss they have incurred upon themselves, rather than those who have lost money that (in many instances) they really can’t afford to do without.
The answer to the issue is the old adage that prevention is better than cure. If lenders and dealerships had been subject to conditions that meant they were not allowed to charge higher-than-necessary interest, then the current situation would not have arisen.
If you think back to the financial crisis of 2008 onwards, the same adage applies; if banks had been forbidden from selling unsafe financial packages, they would not have incurred the enormous debts they did.
Sadly, the Labour government of the day had relaxed regulatory burdens on the banks – actually facilitating the crash (although it is the banks themselves that must bear responsibility for causing it).
If the lenders and car dealerships fall into financial difficulty, or even fail, because of their own greed, then it will be their fault. Other businesses will rise to replace them.
If I had the money to start one up, I might have a go. “Ethical auto finance” could be a real growth industry in the near future.
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Follow Vox Political writer Mike Sivier on BlueSky
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
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