Press and News

Barclays in credit scandal.

Published February 28, 2019

The consumer affairs editor from the Telegraph. Katie Morley reveals Barclays partner Finance back in the spot light for miss sold loans on everyday items such as, Cars, Home improvements and even furniture. Read the full story below:

'Shoppers mis-sold finance on sofas, windows and cars'

Barclays Partner Finance, registered as Clydesdale Financial Services, is the consumer lending arm of Barclays Bank.

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, failed to stop customers at high street retailers being pressured into taking out loans they may not have been able to afford as recently as 2016, according to an internal report seen by The Telegraph.

SCS, Sofology (formerly Sofaworks), Anglian Windows, Wren Kitchens, Everest, Peter Vardy, and the now defunct Car Carcraft Automotive, were among retailers investigators identified as being most likely to cause customers harm by selling them credit agreements.

It can also be revealed that the bank has been ordered by the Financial Conduct Authority to change its practices and has agreed to compensate mis-selling victims as part of a major review of its loan book.

Fears were raised on Friday that the revelations could reach far wider than Barclays as experts said they 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 high street customers, some of them vulnerable, at risk of pressurized selling and misleading sales tactics by salesman, many of which work 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, investigators said.

At five firms selling BPF loans more than one in ten customers had fallen behind on their monthly payments, with over half of customers at used car garage Car Craft Automotive in arrears, investigators said.

Complaints detailed in the report alleged furniture retailer SCS sold shoppers credit on the false premise that it was "free".

In one case where a customer was sold "free credit", interest was charged at 28.9 per cent, investigators found. On a four year "buy now pay later" agreement 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. The customer’s initial complaint was rejected.

Also identified at other retailers were instances of large 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 of their policy.

Martin Lewis, founder at Moneysavingexpert.com said: "Banks claim they have changed their culture but we still know that there's little to suggest that anyone who is dealing with financial products on behalf of banks are advisers, they're salespeople.

"And when you push aggressive sales, like we saw with PPI, people get products they shouldn't have and given information which is totally 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. The FCA [Financial Conduct Authority] needs to make its scope broader to work out if this is happening."

"What's shocking about this is the time period is that it's after the PPI settlement and after the FCA banned commissioned based sales for banking staff to try and change the culture."

Fears have been mounting that irresponsible lending by banks could be fuelling a consumer debt bubble, posing a major threat to the UK economy. Last year Mark Carney warned that banks were “forgetting the lessons” of the financial crisis by increasing the risk of reckless lending.

City watchdogs have asked Barclays to improve its processes and are overseeing an ongoing compensation program, in which the bank is reviewing hundreds of thousands of policies and paying out to customers where appropriate. Barclays is already facing a £38.5 million bill to compensate households over failings including solar panel loan mis-selling by businesses that brokered its finance deals.

Although the credit policies were sold by staff at high-street retailers, consumer credit laws mean that the banks who provide the loans are jointly responsible for ensuring good practice.

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, adding that it had "rigorous systems in place" to prevent unethical selling.

A spokesman for 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 takes selling finance "very seriously" and has "comprehensive procedures" in place.

Sofology, Wren Kitchens, Anglian Windows and Car Craft Automotive declined to comment on the allegations.

Article credit: Katie Morley Editor The Telegraph Morley