"Thousands may have paid inflated interest rates in suspected car finance scandal"

[Brendan Burgess]

Thousands may have paid inflated interest rates in suspected car sales scandal

The Central Bank has been called on to probe a potential mis-selling scandal where motor dealers were incentivised to set high interest rates on car purchase deals.

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The Central Bank has been called on to probe a potential mis-selling scandal where motor dealers were incentivised to set high interest rates on car purchase deals.
Car dealers got bigger commissions if they arranged higher cost finance for purchasers.
UK consumers are in line for billions of pounds in compensation after similar practices were exposed there.
The Irish Central Bank has already moved to ban the practice here. It involves car salespeople who arrange finance deals getting higher commission for setting an elevated interest rate, which banks and other finance houses gave them discretion to set.

...
The Central Bank banned DCA practices in July. It said it did this as it was not satisfied that the practice of DCAs was in line with existing requirements of the consumer protection code.

It said it has not seen customer complaints about the practice and it is not currently planning to carry out a look-back review.

 

[Brendan Burgess]

I agree with banning these practices but I don't think it's right to look back over the last 20 years and order a refund where a practice which was not banned.

In time, I would expect the Central Bank to ban Credit Unions from requiring borrowers to hold 25% of their loans in shares and yet to quote the APR on the gross borrowing rather than the net borrowing. But if they decide to order compensation for all victims of the credit union practice, I presume most credit unions would collapse.

 

[Brendan Burgess]

I first referred to this issue back in 2006 but haven't given much thought to it since.

https://www.askaboutmoney.com/threads/a-guide-to-car-finance-and-hp.34550/

I remember at the time being surprised that the car dealer could set the interest rate.

Purple went into it in more detail.

I didn't call for it to be banned back then. I don't think we ever raised it on the Consumer Panel of IFSRA. It definitely wasn't a big issue for us.

It wasn't a hidden practice in that the Central Bank and Financial Regulator would have known about it. But customers did not know about it.

If a car buyer was told that the APR on their car loan was 12% and that the dealer was getting commission, then that is probably ok. The buyer could have sought a cheaper loan elsewhere.

I advised against getting finance from car dealers in 2008.

Driving a deal

Buying a new car may give the opportunity to burn some rubber, but if you're not careful about how you finance it, you may also be burning a hole in your pocket.

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