By his own admission, our client ‘Ashley’ had a poor credit history, but he was still granted finance to buy his new car. Our motor finance experts found, however, that the lending supplied to him was unaffordable.
Ashley visited his local showroom and signed up to a hire purchase deal for an Audi TT, valued at £12,000. The deal was made in May 2018, and he agreed to pay for the car over four years. Paying monthly instalments of £444.83 with the interest rate and APR both set at 35.4%, he agreed to pay a total of £20,907 for the vehicle.
Ashley had a County Court Judgment to his name and felt his options for obtaining finance were limited by a poor credit rating, despite having entered into finance agreements without any issues in the past. He believed that the dealer he approached was the first he’d seen that provided motor vehicle deals to those with a chequered financial history.
Having provided proof of his income with payslips, he passed a credit check carried out at the dealership, though he was never told any details. Ashley recalled feeling pressured to sign the paperwork by a salesperson who made no attempt to assess his situation and circumstances. He felt he had been put under coercion to seal the deal, rather than take any time to consider the impact of the payments and consider if other options were open to him.
Ashley lost his source of income in the wake of the COVID pandemic and found it hard to keep up the payments. He borrowed from family and friends and used the available payment breaks but still missed a number of instalments. He was also aware that these missed payments would increase the interest rate and result in him paying more money. Though he did enter a revised payment plan after running into financial difficulties, further missed payments led to the lender issuing a default notice for the outstanding debt.
Eventually, the repayments were made in full, but Ashley believed the stress and worry caused by the years of struggles had a detrimental effect on him, his mental wellbeing and quality of life.
He contacted Barings Law and we prepared a case to present to his lender. We alleged that their failure to carry out affordability assessments is a failure to establish that the agreement was unsuitable for Ashley. Little or no attempt was made to understand his needs or circumstances, resulting in financial hardship for their customer.
In their response, the lender said they did carry out a full credit search and confirmed his employment and income. However, they were unable to satisfy themselves that the lending that took place was suitable for Ashley’s needs and circumstances.
By way of a resolution, the lender said they would:
• Calculate a refund by deducting the total sum Ashley had paid from the vehicle’s capital price – an overpayment of £8,673.60.
• Apply 8% statutory interest to that sum (minus income tax at 20%) for the time that he was without – and didn’t have access to or the use of – that money.
That meant they offered a compensation payment of £10,118.56*, with no further financial liability to them, an offer that Ashley accepted.
* Sum awarded is before fees and disbursements
