After years of extreme stress caused by her unaffordable motor vehicle finance, our client ‘Francesca’ received a compensation payment, with ownership of the car also being passed to her.
Francesca had visited her dealership and signed an agreement to buy a BMW M3, priced at £8,690. Under the terms of her hire purchase deal, with the APR and interest rate at 39.9%, she was to make 54 monthly payments of £319. This would lead to her paying nearly £17,000 in total for the vehicle.
She had a County Court Judgment against her, which she had defaulted on in the wake of the break-up of her marriage. Francesca, who worked as a carer, was asked for bank statements and payslips to verify her income and outgoings, and she recalls a credit check being carried out at the point of sale but the outcome was not communicated to her, other than that she qualified for credit to take the BMW.
At no point did the salesperson attempt to understand Francesca’s financial circumstances or position. Instead, she was pressured to sign the agreement, rather than go away and consider the effect it would have on her, or explore other financing options that might have been available to her.
The agreement was still active – with arrears – when Francesca contacted Barings Law’s affordability team. She told us that, during her repayment term, she suffered a serious illness which impacted her ability to work. This, in turn, had a negative effect on her finances and meant she struggled to keep up the payments.
Francesca struggled to keep up with her payment schedule, missing payments on a number of occasions. With no personal savings to fall back on, she had to borrow from third parties, such as friends and family members, to continue to pay for the finance.
The worry of trying to maintain payments for the car had a catastrophic effect on Francesca’s mental health and she was signed off by her doctor due to stress.
We presented Francesca’s case to her lender, arguing that she was sold an unaffordable credit package as the lender had failed to comply with its statutory and regulatory obligations, rendering the relationship between Francesca and her lender unfair.
The lender also showed an inability, or unwillingness, to consider Francesca’s ability to maintain the repayments:
• without borrowing from elsewhere; or
• without failing to meet her other financial obligations; or
• without the repayments having a significant adverse effect on her financial circumstances.
Francesca’s lender replied and admitted liability. The lender said that, as it was unable to satisfy itself that the lending had been suitable for her needs, the complaint was upheld.
The lender’s resolution, in addition to removing negative information from Francesca’s credit file, was to:
• work out and refund her overpayment by subtracting the car’s capital price from the total sum she had paid, which worked out as £3,011.35; and
• apply 8% statutory interest to this sum (less 20% income tax); and
• write off her remaining balance, which was £5,204.06.
This meant Francesca was entitled to a cash refund of £3,084.56. Her arrears were cleared, and the title of the BMW was passed to her. In total, Francesa’s settlement amounted to £8,288.62.
*Amount of compensation is before fees and disbursements
