Our client ‘Michelle’ teamed up with Barings Law to make a claim – more in hope than expectation – after she bought her vehicle, a Volkswagen Golf, in a Hire Purchase (HP) agreement.
She took the keys in June 2019 after agreeing to make 60 monthly payments to pay for the Golf, which was valued at £20,187 and which, at the end of the term, cost her a total of £29,221. She was told the interest rate on the credit would be 6.25% and the APR would be 12%.
She made the final payment in 2024 and, although she had paid off the car in full, it had not been without a degree of hardship.
Concerned that she may have been mis-sold the finance agreement but not believing that she had a valid case, she enlisted the help of our Motor Finance team, who looked at the circumstances of the sale. They analysed whether the agreement was affordable for her, given her financial history and circumstances.
Michelle had been making payments to a debt management company when she applied for the credit. She did verify her income and expenditure but doesn’t remember any credit check taking place. She was only asked basic questions about her income and outgoings. Feeling pressured to sign the paperwork rather than taking the time to think over her decision or explore what other options were available, she entered into the HP agreement.
Since she took out the finance, Michelle’s circumstances changed. When the pandemic hit the UK, her partner wasn’t working and she contacted her finance provider with a view to temporarily reducing the vehicle repayments. Her request was declined.
Michelle also underwent a full hip replacement and was unable to work herself. Once again, she tried to reduce the monthly repayments and was refused, being told that reducing the payments would have a negative effect on her credit rating.
She failed to make two of her payments on time. On both occasions her account balance was short by a tiny amount, meaning the payment failed. Michelle ensured that month’s instalment was paid later the same day in person at the bank, but the damage to her rating had already been done by failed direct debit attempts.
She wasn’t made aware at the point of sale that, under the terms of the agreement, missing or late payments would lead to her having to pay more.
Michelle believed that, after she had made the repayments in full and completed the purchase of the Golf, she would not be eligible to complain to her finance provider. She contacted Barings Law, expecting to be told she had no grounds for claiming compensation. However, our legal team examined the circumstances of the agreement and it appeared that the lender had failed to comply with their statutory obligations and created an unfair relationship.
We therefore prepared a claim on Michelle’s behalf and contacted the finance provider to lodge her complaint.
The legal argument rested on the following points:
• The lender did not carry out the necessary creditworthiness assessments that would have illustrated that the agreement was not affordable and risked causing Michelle financial harm.
• When Michelle missed her payments her circumstances were not considered when her requests for help to alleviate her financial issues were refused.
We alleged that the lender did not take the reasonable steps to establish if the agreement was suitable for her needs. Our Letter of Complaint also alleged that they did not comply with Credit Consumer Sourcebook (CONC) guidance regarding Michelle’s request for a rescheduling of her payments.
The lender agreed to uphold Michelle’s complaint and took steps to make amends, via a payment of £7,033.50 as a refund of the interest payments made. They also added 8% simple interest for the time that Michelle was without those funds. After a deduction for income tax, that amounted to a further £2,471.48.
In addition to making a payment of £9,504.98* as compensation, the lender removed any negative information relating to the agreement from Michelle’s file.
*Amount is before any fees and disbursements
