Our client ‘Wayne’ was able to recover nearly £9,000 after he paid twice the cash value of his car on a hire purchase (HP) agreement.
The Audi A1 was valued at £7,995 and Wayne took the keys in April 2017. By the time his finance agreement was completed and paid in full, it had cost him £16,035.61, with the interest rate and APR both set at 37.5%.
Although Wayne had made all of his payments on time, and completed the five-year term, he was concerned that he had been sold an unaffordable finance agreement. He contacted Barings Law and we looked at the circumstances of the sale.
In addition to his rent and other usual living expenses, Wayne was making credit card repayments every month. He told our Motor Vehicle Finance Affordability team that no adequate affordability checks were carried out at the point of sale.
Wayne, who is a truck driver, did feel that he had suffered financial hardship as a result of the HP agreement, and believed this was due to the dealer’s negligence in assessing his ability to keep up the payments. He was required to verify his income and expenditure but felt that the salesperson was applying a degree of pressure on him to sign the paperwork, rather than look to understand his financial circumstances.
He told us that no thorough assessment was carried out and the checks that were made seemed insufficient when deliberating if he could afford the monthly payments.
Wayne recalled that he wasn’t informed about different types of finance that may have been available, such as Personal Contract Purchase. He was advised at the point of sale that the finance product being offered to him for the Audi was the only option open to him.
Our legal team looked to establish whether Wayne could afford to make the monthly payments:
- Without having to borrow money from elsewhere
- And be able to meet his other financial obligations
- And without the payments having a significant and adverse impact on his financial situation.
We contacted Wayne’s lender on his behalf, alleging that their failure to establish whether the HP agreement was suitable for his needs and circumstances created an unfair relationship, and that their negligence caused their customer financial hardship.
Had the creditworthiness checks taken place it should have highlighted that the repayments would cause Wayne significant financial harm. We indicated that, in the event of the case being referred, the Financial Ombudsman Service would agree with our position and would insist on the lender remedying the situation.
Our suggested remedies were that the lender:
- Repaid the sums and interest paid by Wayne, as well as any deposit he paid at the outset;
- And made a payment to Wayne of simple interest applied to the money he did not have the use of during his repayment term.
The lender responded, upholding Wayne’s complaint.
They offered a solution whereby they deducted the capital price of the car from the total sum he had paid to them and refund the overpayment, which amounted to £7,408.92.
The lender applied 8% statutory interest to that sum (deducting income tax) to leave a final balance of £8,916.11 to be paid to Wayne, who would have no further financial liability to them. The lender also agreed to remove any negative information from Wayne’s credit report.
* Compensation awarded is before fees and disbursements
