In June 2019, ‘Connor’ entered a five-year hire purchase (HP) motor finance agreement after purchasing an Audi A3 Sportback valued at £14,995.
After an APR rate, including interest, of 48.9% had been added onto the total cost of the vehicle, Connor would end up repaying £34,091.61 over the five-year period.
At the time, he did not recall any credit checks taking place and was not asked to have his income or expenditure verified. While he was not subject to an individual voluntary arrangement or a County Court judgement, Connor was in arrears with his rent.
At the point of purchase, Connor felt pressured into taking out the agreement and was led to believe it was the only option available to him.
“I feel so let down by them. I felt under pressure as I needed a reliable car for family and work purposes but since then I have done nothing but struggle every month with other commitments that are far more important than lining a finance company’s pocket,” he said.
Throughout the duration of his agreement, Connor’s financial circumstances changed. He struggled to make ends meet and had to strictly budget his finances. Over one Christmas period, Connor missed two payments which resulted in him borrowing money from friends and family. This had a detrimental effect on his mental health and family life.
“I was constantly very, very low and felt depressed that I couldn’t take part in family events such as taking my son out to enjoy quality times on weekends with him,” said Connor. “I almost lost weekends with him due to having to take on more hours at work and working weekends just to live.”
Connor contacted Barings Law after realising his agreement was unaffordable and legal action could be taken to help him. We then set up a case on his behalf on the grounds of unaffordable lending, insufficient creditworthiness and affordability checks not being carried out.
Our legal teams contacted Connor’s finance provider on his behalf to submit an affordability complaint. However, his finance provider decided not to uphold the initial compliant as they were satisfied the finance was provided fairly and the agreement was affordable.
In Connor’s best interest, Barings Law then escalated the complaint to the Financial Ombudsman Service (FOS) to investigate further. The FOS responded to the complaint and noted several red flags that should have been raised if the lender had conducted efficient checks, including a considerable amount of gambling transactions on Connor’s bank statements. The FOS said: “the agreement was unaffordable without adding these [gambling transactions] in. Although it is fair to say that the lender would have seen these transactions had they completed reasonable and proportionate checks and would likely have not made the decision to lend.”
They continued: “The lender should have done more to check that the agreement was affordable and sustainable for the client and these further checks would have most likely affected their lending decision. The lender has acted unfairly in approving the lending for the client when it appears he was not in a financial position to be able to service the agreement. His income was far less than the lender’s calculations and their expenditure significantly more.”
The FOS drew a conclusion that it was not fair for Connor to be charged any interest or other charges under the agreement and that the finance provider should:
1. Refund any payments Connor made in excess of £14,995, representing the original cash price of the car.
2. Add 8% simple interest per year from the date of each overpayment to the date of settlement.
3. Remove any adverse information recorded on Connor’s credit file regarding the agreement.
After determining the decision was fair, Barings Law, Connor and the finance provider accepted the FOS’s outlined proposal. As a result, a settlement was secured for £19,427.30* because of overpayments and simple interest.
*Amount awarded to Connor is before legal fees and disbursements.
