By ALEX BRUMMER, CONSULTANT EDITOR
The gravitational pull of Generation Y – the millennials – towards fintech sites such as Revolut, Wise, Monzo, Robinhood and Nutmeg (now under the Chase banner) is often attributed to their tech-savvy skills.
Maybe. But this fresh band of financial providers, and online banks such as Atom and Shawbrook, also offer a digital alternative to distrusted bigger financial players.
Britain has been up to its neck in financial mis-selling scandals for more than a quarter of a century.
Among the most prominent have been endowments, wrongfully sold private pensions, payment protection insurance (PPI) and, now, the car finance swindle.
All have had corporate and economic consequences. The endowment selling scandal of the 1980s and 1990s cost Britain’s life insurers up to £40billion.
It played a big role in the destruction of an industry, with the demise of Equitable Life, the transformation of the Prudential into an Asian insurer and the roll-up of most of the life providers into Resolution and Phoenix, which recently rebranded itself as Standard Life.
Bad deals: Millions of consumers could be eligible for £700 payouts after City watchdog The Financial Conduct Authority set out compensation plans for the car finance scandal
As an economic phenomenon the financial sector has effectively been offering its own version
of quantitative easing – or helicopter money – with PPI alone gifting back £53billion to consumers.
By these standards, the estimated payout of £11billion to car buyers who suffered an injustice is relatively small.
Hidden commissions were paid by financial suppliers, such as Lloyds Bank and Close Brothers, two of the more-recognised offenders, which should have known better.
Once the barrel starts rolling one never quite knows where the final bill will end up. Initial reaction from FTSE investors was to mark up the shares of Lloyds, Barclays et al in a minor relief rally.
The sums involved do not look existential, as with previous episodes.
Yet none of this is risk-free. There is a steady erosion of confidence in our high street banks. Branch closures are a particular irritant.
Barely a day passes without a letter or email of complaint from readers fearful of the impact of closures on them personally, local business and high streets.
One complainant wrote to Paul Thwaite, the chief executive of NatWest, in August asking for a stay of execution for the historic Abingdon branch.
The outlet closed its doors last month – with no reply from Thwaite and barely an explanation from a junior executive.
A scandal over car finance should not have come as a great shock to anyone. Second-hand car dealers often are shorthand for financial hooliganism.
New car buying is fiendishly complex, with leasing deals, deposits that vanish in a cloud of smoke and re-leasing piling up the monthly charges.
A clean-up has been long overdue and more vulnerable customers, the uninitiated first-time purchaser, the elderly and the less financially literate, have been easy marks.
Even those of us who abhor the compensation culture have reason to be sympathetic to victims who signed up to 14.2m bad deals between 2007 and 2024.
We can be thankful that new ways of buying and selling second-hand cars, such as ‘We Buy Any Car’ owned by Constellation, offer a more transparent way of doing business.
If you cannot trust regulated suppliers of credit to be up-front and honest with customers, then the nation is really lost.
There will be consequences for the economy. Showering £700 on affected individuals should provide a boost to consumers in much the same way that Trump’s cheques to US taxpayers in Covid helped people get through.
The banks have been campaigning heavily against the idea of an increase in the current levy on profits from 2 per cent to a higher figure of, say, 5 per cent in the upcoming Budget.
Their principal argument is that it could put a crimp in their ability to lend at a time when Chancellor Rachel Reeves is desperate for growth.
The riposte to that is the banks, through bad faith with car buyers, have betrayed trust once bestowed on them by the public.
If the profits spew out so generously that they can afford to buy back their own shares, then it should be a payback moment for working people.
