Tomorrow's Business Today
A boost to the economy from mis-sold loans
The bankers are unhappy. They are being forced to cough up for car loans that regulators say were mis-sold and guess what, they don’t like it.
Last week Santander abandoned its full-year results announcement due to “uncertainties” about the redress scheme.
The £11bn plan would put credit and jobs at risks, it warned.
Sounds bad. How will it affect Santander directly?
Well, it “did not expect a material impact on its capital or liquidity even in the event of any potential increase to its existing motor finance provision”, reports Reuters.
This is standard banking procedure.
a) Moan like hell about any perceived injustice and warn about the consequences to politicians and the public.
b) Tell shareholders it’s all fine really.
If this really is bad for the banks the biggest conclusion is: don’t buy shares in banks.
(Why would you?)
Even if the banks are right that they didn’t do anything wrong, it is understandable if the public perceives that the business model involves routinely legging us over.
Caveat emptor, buyer beware, is fair enough, but the banks have an informational advantage over us, and they exploit it.
If you’ve ever applied for a car loan you would quickly see that the terms are terrible and look for another way.
If you really need a car, for family or work reasons, that may not be an option.
The bank bashing must stop, says Patrick Jenkins, arguing against a windfall tax on the sector.
Let’s say he’s right. We’ll still definitely take the £11bn back for the overpriced car loans.
The banks talk as if any fines that come their way are a function of regulatory overreach, rather than terrible deals in the first place.
In this case, car dealers were incentivised by lenders to set higher interest rates in exchange for commissions that were not disclosed to the consumer.
If this is legal, it is also plainly wrong.
Over at Lloyds, chief executive Charlie Nunn tells MPs: “We don’t have evidence of harm, or that we’ve broken regulation.”
Lloyds’ bill might be the thick end of £5 billion, so he has got to complain really.
Nunn thinks all of this will just hurt the economy. I beg to differ.
Payouts from the PPI (payment protection insurance) scam put £53 billion into the hands of consumers.
The car loan payouts could be just the little boost to consumer spending we need.
Please send candidates for press release of the day to:
Press release of the day
Low-income countries could make $75 trillion if they embrace AI and improve their energy and capital markets.
John Walker, chairman of Oxford Economics, says: “Low-income countries could be uniquely well placed to benefit. Take, for example, the impact on jobs. In high-income countries AI is likely to disrupt most jobs.”
“But in low-income countries, the skills mix is different and only around a quarter of existing jobs are likely to be impacted. While productivity gains could raise incomes and consumer spending power.”
Stories that will keep rolling
1) Credit scores to include rental payments. BBC
2) Unemployment to hit 5% next year predicts EY. City AM
3) In Grok we don’t trust. The Guardian
4) Trump may already be losing the economic war for the Asia-Pacific. Telegraph
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