Anyone who has ever been sold a big-ticket household item has probably heard their salesman say: ‘Let me just have a word with my manager.’ It’s a common tactic used to make the buyer feel like they’re about to receive a brilliant, discounted deal. But have such ploys brought the direct-sales industry to the brink of a PPI-style scandal?
Steve had long since resigned himself to the fact he had been ripped off by rogue traders, who conned him into taking out a 10-year finance deal. Then an unsolicited letter landed on his doormat in autumn 2016, from Barclays Partner Finance. Although Steve had complained to the trader before without success, it looked like its finance company was ready to listen.
Something had changed, and that something was a 17- week trial that delivered 64 guilty verdicts against staff and directors of Summit Roofguard. The home improvement firm had arranged Steve’s finance and carried out shoddy work on his Birmingham home in 2013.
‘The letter indicated Barclays were going to help, but it wasn’t clear how,’ said the disabled grandfather. ‘It said Summit had been “trading disruptively” and fraud may have occurred, so I wrote back, but I didn’t hear anything. ‘I chased it, but I got nowhere. It wasn’t until I went down to the branch and said “I’m not leaving until it’s sorted” that things started happening. Eventually, Barclays wrote off the credit and sent a contractor to fix the guttering, but this had taken almost five years.’
Steve had originally taken out a 10-year finance deal for more than £2,000 to repair the guttering. Had his finance agreement run its full term, he would have paid back almost £5,500. ‘When Summit first came to the house I got all this “let me phone the manager”, but I knew it was all crap,’ says Steve. ‘I just said, “What’s your bottom line?” I needed the work doing, I had damp in the house and I didn’t have the cash.
‘The work they did was terrible and I would have ended up paying three times as much over 10 years, which they never explained properly. They said I wouldn’t start the repayments until I signed the job off, but I never did, so that was a load of crap as well.’ It is now understood that Barclays has accepted Summit’s sales tactics fell short of its standards and it is believed to have offered recompense on a number of occasions.
14 steps to a scam
The Summit prosecution centred on a training manual its staff were required to follow, to trick victims – often the elderly and vulnerable. Entitled ‘The 14 Steps to a Sale’, the scam involved falsely stating the necessity of the work, establishing an inflated reference price and then inviting victims to apply for a ‘feature-home subsidy’ – a discount for allowing their home to be featured in future marketing material.
Victims were worn down by hours-long pitches that included numerous calls to a sales manager. Eventually, the price would drop by thousands – but only if the customer signed on the spot. The judge said it was a sham. By proving the case in March 2016, Dudley Trading Standards had shown that everyone who went into a Barclays finance agreement with Summit did so as a result of an unlawful and misleading criminal sales process.
Dudley TS established that Summit arranged 1,152 Barclays finance agreements over a three-year period, but Summit had been offering Barclays finance for nine years. During the Summit trial, the defendants were incredulous. Director Sarah Beadle said she had spent her entire adult life working in the glazing and roofline industry, and had always followed the same sales method.
Another director, Martin Evans, said the technique was used throughout the industry and named six other firms that used it. The pair were found guilty of unfair, misleading or aggressive commercial practices and jailed for two-and-a-half years each. Evans later had his sentence cut to two years on appeal.
Four of their staff received suspended sentences for similar offences. It could not be reported at the time because it was already subject to a criminal investigation, but one of the six firms named by Summit was Zenith Staybrite. The firm had caught the attention of Buckinghamshire and Surrey Trading Standards, and had been using precisely the same technique as Summit, right down to the finance.
Evans is a former Zenith Staybrite sales manager and the trial heard that he took the 14 Steps training manual from Zenith Staybrite to set up Summit, in 2005. It was a cut-and-paste job. Four months after the Summit trial ended, Zenith Staybrite was prosecuted for using inflated reference prices and supposedly time-limited discounts, but there had been some divergence from the 14 Steps in the years since Evans had left.
The firm went bust in August, soon after it was fined. Evans’ and Beadle’s claims that these practices were industry standard were starting to look more credible. Indeed, Companies House records link the pair to seven other home-improvements firms, not identified in the trial, and similar allegations of unfair, misleading or aggressive commercial practices were uncovered in Birmingham, Warwickshire, Staffordshire, Leicestershire, Gloucestershire and Herefordshire by Dudley TS during its investigation of Summit.
So, is this the sort of wholesale pre-contractual misrepresentation and mis-selling that has been seen in other parts of the finance industry? Dudley TS said it can only confirm it reported the matter to the Financial Conduct Authority (FCA), which has a policy of neither confirming nor denying anything unless it has made a formal decision. Other regulatory and consumer protection agencies were reluctant to comment.
Barclays initially said it had followed the correct policies and procedures. ‘Full checks were undertaken for Summit Roofguard in 2005. When we were alerted by the trading standards office in early 2014, we investigated the concerns and terminated the relationship immediately,’ a spokeswoman said. When pressed on what action Barclays took after the Summit prosecution, and if there was a programme of redress taking place now, she added: ‘If any customer feels they have been affected by this matter, then they should contact Barclays Partner Finance to discuss their concerns.’
The case for wholesale pre-contractual misrepresentation would have been much clearer but for all the other fraudulent activity taking place at Summit. The firm, which claimed to have a £4m turnover, had incentivised offering finance and would take the top sales staff on trips to New York and Monaco. It led to a culture of maladministration.
John Campbell-Muir, a former Summit salesman who gave evidence at the trial, said staff would frequently fake signatures and change personal details on the credit applications. ‘I watched staff altering documents on a daily basis,” he said. ‘I kept saying to them “you are breaking the law”, but they didn’t care. I stood up to them in court and told them what a bunch of crooks they were.’
Lee Reynolds, a barrister who specialises in prosecuting rogue traders, said: ‘All the criminality seems to be based within the company [Summit]. In one sense, Barclays is a victim, just like everyone else, but if there is a routine or even semi-routine changing of details, Barclays should have picked that up. ‘What happened at Summit is sadly just very typical of fraudsters. It’s a widespread practice throughout most high-pressure sales industries. Deliberately inflating the price, knowing you are going to come down, is quite simply illegal.
‘All this rubbish about feature-home subsidies is just fraud, but it’s the type of rubbish that is prevalent in a lot of the cases I do.’ Reynolds was involved in a prosecution against a UK bed firm, which sold products to elderly people. He says they used a very similar sales technique, with a vastly inflated opening price, a conversation with the sales manager from the consumer’s phone, with a discount offered because they have completed a survey.
‘The cases that I’m involved in, 99 per cent of them arise from consumer complaints,’ says Reynolds. ‘Unless you have a whistleblower, or you get someone to go undercover, it’s very difficult. ‘But everyone seems to be doing it. Just look at the Black Friday sales; you can guarantee that the vast majority of those discounts are not genuine discounts, and these are supposedly reputable high street brands. Very few people are making complaints because it is just accepted. It has become the norm for these companies to get ignored.’
But not everyone has ignored the wider issue. About 10 years ago, the Finance and Leasing Association (FLA) set up the Specialist Automotive Finance (SAF) scheme. Last year, about 33,000 sales staff took the annual SAF test. The scheme is funded by the FLA’s members – these are lenders and finance companies, including Barclays Partner Finance, and not the dealerships themselves – but the scheme is offered free of charge to frontline sales staff in car showrooms.
Adrian Dally, head of motor finance at the FLA, would not be drawn on the Summit case and rejected any suggestion of mis-selling in the motor finance sector. However, he recognised there had been a ‘process of change’ and said FLA members could claim some of the credit. ‘Finance is a critical part of the economic and social infrastructure and must stay sustainable,’ he said.
‘If you go into a responsible dealership and look up on the wall, you should see a SAF plaque, which shows that every customer-facing member of staff has passed an annual test. The test is essentially about 35 hours of study a year, and provides the relevant product and regulatory information that someone who is talking to a consumer needs to know. ‘It’s about how motor-finance products work, who they are suitable for, what the FCA regulatory requirements are, and whether they [sales staff] can advise or sell.’
He added: ‘As a sector, we stand for responsible lending, because morally and legally it’s imperative. ‘But also because, commercially, responsible credit means a finance company only lends if they know that money will come back to them, otherwise they don’t have a business.’