Our client ‘Emily’ entered into a Hire Purchase (HP) agreement to buy her BMW 118D Sport, priced at £15,446, over a four-year period.
The interest rate on the agreement was 14% and the APR was set at 26.9%, meaning Emily would pay more than £24,000 for the vehicle over the course of the agreement.
That agreement, however, would leave her struggling to get by and cause constant worry about her finances.
At the time of taking out the agreement in 2021, Emily was subject to multiple County Court Judgments (CCJ) and three outstanding default accounts after an ex-partner had taken out credit in her name. She was also in arrears with other loan and credit card repayments, on top of paying for essential bills including a new mortgage.
When taking out the finance, Emily did not recall any credit checks taking place, or any effort being made to understand her financial circumstances. She did recall feeling pressured by the dealer into accepting the arrangement instead of being given sufficient time to explore other options. She was told that the vehicle would be gone if she went away to think about it and it was the “best deal on the market”.
During her repayment term, Emily suffered a serious injury which led to her financial circumstances changing, and while she didn’t have to borrow money from friends, family, or loan providers, she did fall into financial difficulty while trying to maintain payments now that things had changed for her.
Believing she had been mis-sold her finance agreement, Emily contacted Barings Law. Our motor vehicle finance experts contacted the lender on her behalf with our allegation that they had mis-sold her credit on the grounds of unaffordability; namely that no adequate affordability checks were carried out which meant that the lender had not taken reasonable steps to consider if the HP agreement was suitable for Emily’s circumstances.
The lender disputed Emily’s complaint, stating that “it would not be fair and reasonable to uphold the complaint” and that they believed they “undertook a reasonable and proportionate assessment”.
Our team was further instructed by Emily to progress the claim to the Financial Ombudsman Service (FOS), which reviewed Emily’s complaint and agreed that the lender had acted unfairly in charging her high interest under the agreement. Based on her financial circumstances, she would not have been able to afford any more than the original cash price for the case.
As a result, the FOS instructed the lender to refund any payments made on top of the original cash value of the car, adding on 8% simple interest per year from the date of each overpayment. Additionally, FOS instructed the lender to remove any adverse information recorded on Emily’s credit file regarding the agreement.
A refund of £6,562.85* was made to Emily and her remaining balance under the agreement was written off by the lender.
* Amount is before fees and disbursements are applied.
