Car finance

Consumers might complain that the car is faulty and they want it to be repaired or to give it back. A finance provider, supplying cars under conditional sale, hire purchase or hire agreements, is responsible for the quality of the car that is supplied. This is because the Consumer Rights Act 2015 (for consumer contracts entered into from 1 October 2015) implies a term into the contract that the car be of satisfactory quality.

If you provide the consumer with a credit card or point of sale loan that they use to buy the car, then the transaction could be covered by section 75 of the Consumer Credit Act 1974. Section 75 allows the consumer to raise a claim against you in certain circumstances where the supplier has breached the contract or misrepresented the goods. 

If a consumer says their car is faulty, it doesn’t necessarily mean that you as the finance provider are responsible. We need to consider whether the faults mean that the car was of unsatisfactory quality.

The Consumer Rights Act 2015 says that the quality of goods is satisfactory if they meet the standard that a reasonable person would consider satisfactory, taking into account:

• any description of the goods
• the price or other consideration for the goods (if relevant)
• all other relevant circumstances

For a car, the other relevant circumstances we might also take into account are things like the age and mileage at the time of supply and the car’s history.

The Consumer Rights Act 2015 also says that the quality of goods includes their state and condition and the following aspects (among others) are in appropriate cases aspects of the quality of goods:

• fitness for all the purposes for which goods of that kind are usually supplied
• appearance and finish
• freedom from minor defects
• safety
• durability

If the contract was entered into before 1 October 2015, or it’s a business to business contract, then we have regard to other legislation like the Sale of Goods Act 1979 or the Supply of Goods and Services Act 1982.

We think it’s fair to say that a reasonable person would expect the quality to be higher in a new car, than a cheaper, more roadworn car. And that a new car could be used and free from defects for a considerable period of time.

For a used and more roadworn car, it’s unreasonable to expect it to be in perfect condition and it’s likely the car will show signs of wear and tear. But a finance provider might still be responsible if the car was sold with defects that a reasonable person wouldn’t expect on a car of that price, age and mileage.

To investigate a consumer’s complaint, we’ll need a copy of the credit agreement. We’ll also usually ask you for things like:

• a summary of the case with your comments – including a chronology of events
• a copy of the complaint notes
• any garage job sheets/invoices, pre-sale checklist and inspection reports
• any other evidence you’re relying on – like call recordings in cases where a consumer agreed to a repair and now disputes what was agreed

Asking the consumer to provide video footage or photographs can also sometimes be helpful in complaints where the consumer says the fault is intermittent or a garage hasn’t been able to replicate the fault.

This information, along with what the consumer tells us, helps us to decide whether the car was of satisfactory quality at the point of supply.

If a consumer complains that they’ve been misled about a key feature of the car or the finance agreement, we’ll take account of the relevant law and guidance in deciding what’s fair and reasonable in all of the circumstances. This includes:

• the law on misrepresentation
• the Consumer Rights Act 2015
• the Consumer Protection from Unfair Trading Regulations 2008
• credit broking obligations set out in the FCA Consumer Credit Sourcebook (CONC)

We’ll also consider the Consumer Credit Act 1974, particularly section 56. In some circumstances, this makes the finance provider liable for what is said by a credit broker or a supplier before the consumer takes out certain types of credit agreements. We can also look at some complaints about a mis-sale against the credit broker.

If a consumer complains that they’ve been misled about a key feature of the car or the finance agreement, we’ll look at things like:

• what the consumer and the dealer or broker says happened and the significance of the issue they are unhappy about
• any information or documentation the consumer was given about the car before they got it
• supporting evidence from either party such as correspondence leading up to and shortly after any agreement was entered into – this could include emails or text messages

To investigate a consumer’s complaint, we’ll need a copy of the credit agreement. We’ll also usually ask you for things like:

• a summary of events with relevant dates and your comments
• a copy of your complaint notes and any correspondence you’ve had with the consumer
• any pre-sale information about the car – like the invoice, advert, brochure, manual or service history book
• any other documentation given to the consumer like the pre-contract information document or information on the types of finance on offer
• any other evidence you’re relying on like correspondence with the consumer, credit broker or dealer

All of this information helps us to decide whether the car or the agreement was misrepresented, mis-sold or misdescribed. We’ll also take into account what the consumer says they were told at the time, as well as what the credit broker or dealer says. We’ll then decide what we think is most likely to have happened.

If we think something was said that wasn’t correct, or that the consumer was misled into taking out the credit agreement, we’ll think about the impact this has had on them. We’ll consider whether they would still have gone ahead with the transaction, might have done something differently or whether they have lost out in any way.

Excess Mileage

If a consumer complains that they weren’t told about the mileage cap, we’ll investigate whether the car finance agreement was mis-sold.

If a consumer knew about the annual mileage cap, but doesn’t think that the charges are fair, we’ll look at the circumstances in which the car was given back and what the agreement says about the annual mileage cap. We’ll also look at the consumer’s specific circumstances in deciding whether it’s fair and reasonable for the consumer to pay all or part of the charge.

Damage charges

If a consumer complains about charges being applied for damage to the car when it’s returned at the end of the agreement, we’ll think about what the agreement says about any charges that can be applied. We also have regard to what the consumer says about the damage/charges.

We’ll look at each individual damage charge and decide if in all the circumstances the charge is fair and reasonable. We’ll take industry guidance into account and consider things like the:

• age and mileage of the car when it was first hired and returned
• quality of any reports relied on by the business
• any photographs the consumer might have taken

We’ll also think about things like:

• whether the amount of the damage charged is in proportion to the damage/repair work required or whether a cheaper repair could have been carried out
• any impact that a delay in collection or in any report being prepared post collection might have had
• whether the consumer was given a fair opportunity to put any damage right

To investigate a consumer’s complaint, we’ll need a copy of the credit agreement. We’ll also usually ask you for things like:

• a summary of the case with your comments – a timeline of events is helpful especially if there’s a dispute about when the car should have been collected/inspected
• a copy of your complaint notes and any correspondence you’ve received from the consumer about the issue
• any inspection reports that you’re relying on to evidence the damage as clearly as possible – ideally with the use of rulers and zebra boards, and the consumer should have been given an opportunity to see the report and comment on it
• the odometer reading in excess mileage charges complaints
• any other evidence you’re relying on

In some circumstances, we might ask you more about the repair work carried out and about any actual loss suffered by you.

We’ll then decide whether it’s fair and reasonable for the consumer to pay all or part of the excess mileage or damage charges.

If we don’t think the car was of satisfactory quality, we’ll think about what (if anything) needs to happen to put things right.

It might be that you don’t need to do anything if the car has been repaired or taken back, or if the consumer’s already been awarded compensation. But if things haven’t been put right, we might say you should:

• repair the car if we think a repair is reasonable and will resolve the issue
• replace the car if there’s a suitable like-for-like replacement available
• give a price reduction
• allow the consumer to give back the car and end the agreement – if we think that rejection of the car is reasonable

We might also suggest that you compensate the consumer in cases where:

• they haven’t had use of the car
• their use of the car has been impaired
• they’ve been caused distress and inconvenience

If the consumer has incurred any costs relating to the complaint – for example storage costs – we’ll consider whether it’s reasonable for you to reimburse these costs.

If we do think the mis-sale or misdescription has impacted the consumer, we might ask you to:

• award some compensation to reflect any loss the consumer’s had by not getting what they were promised – like a particular feature on the car
• write off some or all of the charges under the agreement – if we think they weren’t properly brought to the consumer's attention
• end the agreement and take back the car – if we think the consumer wouldn't have gone ahead with the transaction, or if it would be unreasonable to expect them to continue with the agreement

We might also suggest that you compensate the consumer in cases where:

• they haven’t had use of the car
• their use of the car has been impaired
• they’ve been caused distress and inconvenience

If the consumer has incurred any costs relating to the complaint – for example storage costs – we’ll consider whether it’s reasonable for you to reimburse these costs.

If we think the charge for excess mileage and/or damage is unfair or unreasonable, we may ask you to waive some or all of the charges.

In some situations, if the consumer has been caused distress or inconvenience, we may also ask you to pay some compensation.