Barclays faces credit mis-selling scandal
CONSUMERS who have bought cars, furniture and home improvements on credit supplied by one of Britain’s biggest banks are embroiled in a potential mis-selling scandal, it can be disclosed.
Barclays Bank’s consumer lending arm, Barclays Partner Finance (BPF), failed to stop customers at high street retailers being pressured into taking out loans they might not have been able to afford as recently as 2016, according to an internal report seen by The Daily Telegraph.
It can also be disclosed that the Financial Conduct Authority (FCA) has ordered the bank to change its practices, and the bank has agreed to compensate mis-selling victims as part of a major review of its loan book.
Last night experts said the reports bore similarities to the PPI scandal, in which millions of banking customers were mis-sold insurance by salesmen incentivised by commission.
Investigators alleged that BPF failed adequately to supervise retailers offering Barclays loans, leaving customers, some of them vulnerable, at risk of pressurised selling and misleading sales tactics by salesman, many working on commission. This was due to a lack of resources and “conflicted interests” of area managers whose main job role was to grow the business.
SCS, Sofology (formerly Sofaworks), Anglian Windows, Wren Kitchens, Everest, Peter Vardy and the now defunct Carcraft Automotive were among retailers investigators identified as being most likely to cause customers harm by selling them credit agreements.
At five firms selling BPF loans, more than one in 10 customers had fallen behind on their monthly payments, with more than half of customers at the used-car garage Carcraft Automotive in arrears, investigators said.
Complaints alleged the furniture retailer SCS sold shoppers credit on the false premise that it was “free”. In one case, a customer was sold “free credit”, but interest was charged at 28.9 per cent, investigators claimed. On a fouryear “buy now, pay later” deal with 12 months interest free this represents a hidden cost of around £1,000 on a typical £2,000 sofa purchase.
The investigators also raised a complaint on behalf of a Sofology
customer with learning difficulties who was allegedly coerced into a sale after the features of the finance agreement were insufficiently explained. Their initial complaint was rejected.
Also identified at other retailers were instances of loans of more than £10,000 sold to under-21s, as well as policies with extra-long terms sold to elderly customers who had a significant chance of dying before the end.
Martin Lewis, the founder of Moneysavingexpert.com, said: “When you push aggressive sales, like we saw with PPI, people get products they shouldn’t have and given information which is misleading. This yet again should knock the faith that people have in financial institutions. I would not be surprised if it was more than just Barclays.
“What’s shocking about this is the time period, that it’s after the PPI settlement and after the FCA banned commissioned-based sales for banking staff to try and change the culture.”
City watchdogs have asked Barclays to improve its processes and are overseeing a compensation programme in which the bank is reviewing hundreds of thousands of policies and paying out to customers where appropriate. Barclays already faces a £38.5 million compensation bill over failings including solar panel loan mis-selling by businesses that brokered its finance deals.
Although the credit policies were sold by staff at retailers, consumer credit laws make the banks who provide the loans jointly responsible.
It is understood that the FCA raised concerns with Barclays after receiving an application to expand its loan book, leading to the bank commissioning an external firm to carry out a report. A Barclays spokesman said: “Since commissioning this report in 2016, we have maintained an open and cooperative dialogue with the FCA, and have taken significant steps to review and improve our systems, processes and training to ensure that we meet our regulatory obligations and policy commitments.
“Where any customer detriment is discovered, we will act swiftly to identify and fix the root cause, and learn how we can prevent it from happening again.”
An FCA spokesman said: “We were aware of the issues identified and raised concerns with Barclays at the time. We requested that they make changes to their processes and Barclays committed to fixing them.
“We continue to supervise the firm closely, which includes ongoing dialogue with Barclays about its lending practices. We are monitoring the situation and should any new information become available we will consider further regulatory measures.”
Everest said it was unaware of the report, but had “rigorous systems in place” to prevent unethical selling.
Peter Vardy said: “We would take any alleged mis-selling of finance products extremely seriously and any such allegation would be fully investigated. We work closely with all our finance partners to ensure that we are treating customers fairly whether they are purchasing a vehicle, a service or parts.”
A spokesman for SCS said it took selling finance “very seriously” and had “comprehensive procedures” in place.
Sofology, Wren Kitchens, Anglian Windows and Carcraft Automotive declined to comment on the allegations.