Losing his job had led to financial hardship and missed repayments. But, after enlisting the help of Barings Law, our client ‘Rick’ was awarded more than £10,000 in compensation for mis-sold vehicle finance.
Rick collected the keys to an Audi A5, having arranged a hire purchase (HP) deal with his finance provider in 2018. He was paying council tax arrears, had defaulted on paying his rent on one occasion before and had a County Court Judgment (CCJ) against his name, due to a dispute over meter readings when he moved house.
Despite this, Rick was granted the finance to buy the Audi, with the interest rate and APR both set at 32.9%.
Over the HP agreement’s five-year term, his monthly repayments were set at a little more than £352 and so for the vehicle, priced at almost £12,000, he would be paying £21,436 in total.
Rick’s finance providers told him he had passed a credit check at the point of sale, and he verified his income and outgoings at the time. He recalls feeling pressured to sign the paperwork rather than go away and mull over his options.
He did miss some payments, and took a payment holiday during the COVID outbreak, but completed paying off the vehicle in 2023.
His repayment period wasn’t without its troubles, however.
Due to health issues, Rick lost his job and struggled to make his payments on time, with a handful of payments being made late, which had a negative effect on the interest rate that had been set in 2018. He did have to borrow money from third parties to make his payments and believes the worry and stress of what he believed was unaffordable finance had a catastrophic impact on his well-being.
Rick’s mental health was so badly affected he sought medical help and was prescribed anti-depressants.
He contacted Barings Law and our Motor Vehicle Finance experts examined the circumstances under which the HP deal was sold. We then lodged Rick’s complaint with the finance provider, alleging that their failure to comply with statutory and regulatory obligations rendered the relationship between them and their customer unfair.
This is due to their failure to carry out adequate affordability checks, which would have enabled them to assess Rick’s creditworthiness. They failed to consider if the HP package was suitable for his needs, particularly as Rick had a CCJ against him at the time of his application.
It was also reasonably foreseeable that he could have had a reduction in his disposable income, which in turn would have an impact on his affordability. This did turn out to be the case as he was made unemployed during the repayment term, but the lender hadn’t taken reasonable steps to estimate a reduction in Rick’s income. These measures could have included suspending, reducing or cancelling further interest or charges, or allowing a deferment in paying the arrears, which may have granted Rick reasonable time and opportunity to repay the debt.
Given the above, we specified that their lack of care and consideration meant they were responsible for the financial damage Rick suffered.
Our suggested remedy involved the finance provider repaying the money they had collected from Rick, plus the interest that was paid to them, and simple interest for the time he did not have access to, or the use of, that money.
The lender responded and admitted liability, due to the unfair relationship that their failure to check Rick’s creditworthiness had created. Unable to satisfy themselves that the lending in question was suitable for Rick’s needs, they upheld his complaint.
To remedy the situation, the lender refunded £10,448.52. The amount was calculated by working out the overpayment by Rick and applying 8% statutory interest, minus income tax.
* Amount awarded is before fees and disbursements
