Pressure-selling tactics from dealers and lenders can lead to cases of mis-selling on grounds of a customer’s unaffordability, as our client ‘Jenna’ found out when she bought her new vehicle.
Jenna entered into a Hire Purchase (HP) agreement to buy a Hyundai i800, valued at £10,000. The interest rate on the finance was set at 12.5% and the APR was 23.8%. This meant that, at the completion of the four-and-a-half-year term in 2023, she paid a total of £15,933.44 for the vehicle.
Jenna had no debts, she was not subject to an IVA or CCJ and her only regular outgoings were usual living expenses such as rent, which she was not in arrears with. However, she didn’t feel that the finance company were thorough in examining her financial circumstances. She doesn’t remember the dealers carrying out a credit check, nor did they verify her income or expenditure with payslips or bank statements.
However, Jenna did feel that she was put under significant pressure to sign the HP agreement. She succumbed to the pressure and did so, rather than taking her time to consider the finance, the impact it may have on her and any other options available to her.
During the repayment term she made all her payments on time but did have to borrow funds from elsewhere to do so as well as meet her other expenses.
Jenna spoke to our legal experts and we prepared a compensation claim on her behalf.
We approached her finance provider and informed them that the agreement they had entered into with Jenna meant that an unfair relationship had been created between the two parties. Their failure to establish that the package was suitable for her needs breached credit worthiness assessment guidelines.
We argued that the finance provider’s negligence at the point of sale did cause Jenna a degree of financial hardship.
The Credit Consumer Sourcebook guidelines make it clear that they must have considered their customer’s ability to make the repayments:
• without having to borrow money;
• without failing to meet their other financial obligations;
• and without the repayments having a significant adverse effect on her financial position.
The unfair relationship between Jenna and her finance provider meant that they were liable for the financial hardship caused by the HP agreement.
The finance provider decided to uphold Jenna’s complaint and offered a remedy in which they would refund £5,933.44 for the interest payments Jenna had made, plus £2,071.41 at 8% simple interest (with a 20% deduction for income tax) for the time that Jenna was without those funds.
The amount payable to Jenna totalled £8,004.84*. The financer also removed any negative information on her credit file arising from the HP agreement.
*Amount is before legal fees and associated disbursements
