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Unaffordable Lending Claims

Similar to high-cost lenders, numerous car finance companies have engaged in irresponsible lending practices. If your PCP (personal contract purchase) loan was unaffordable, you may be eligible for a refund.

Drawing from our extensive experience in processing thousands of mis-sold car finance claims, the most prevalent forms of unaffordable lending are:

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Excessive Fees: A common complaint about irresponsible lenders involves excessive fees. High-interest rates can result in small loans with expensive regular payments. 

Most lender interest rates are between 0% and 5%. Borrowing funds with interest rates above 5% can make  repayments challenging, especially if the lender is unaware of or indifferent to the income a borrower has.​​​​

While some companies lend responsibly without a predatory interest rate, other lenders may take advantage of those with low income. Consumer credit does impact interest and charges for everyone, but irresponsible lenders often charge more.

Unnecessary or Hidden Fees: Interest and charges for guarantor loans and credit card borrowing could be excessive or unnecessary. Unfortunately, it’s common for an irresponsible lender to push additional services on a borrower regardless of their income or circumstances. They could also downplay the hidden costs inside the credit agreement and expect to be paid monthly on time.

No Credit Check Details: Irresponsible lending claims often stem from a lender failing to conduct proper checks on a borrower’s creditworthiness. A creditworthiness assessment or affordability check is necessary before a lender can give a borrower credit or money from a loan. The lender must know that you have the income to make timely repayments each month after borrowing money.

Lenders expect to be repaid for everything they’re owed. Still, the company may be practising unaffordable lending if they award you money or credit despite knowing your current income and what you can afford. You should expect to supply a lender with your wage slips, bank statements, and details about any debt you owe so they can perform a proper affordability check.

If you have a complaint against your lender for irresponsible lending due to an improper affordability check, you can request a copy of your assessment results. If the company completes the affordability check correctly and the lender knows about your low income or compromised financial status, you may be eligible to file a claim.

Balloon Payments: After borrowing money, examine your loan or credit agreement and review the term’s repayment schedule. If your payments each month are relatively low, it could be because the lender expects you to make a large payment at the end of the term despite knowing you can’t afford to pay such a hefty amount at once.

Responsible lenders will ensure each borrower can make all payments on time and in full without further borrowing or experiencing financial hardship.

What To Do If You’re a Victim of Unaffordable Lending

When you agree to a credit agreement for a card, guarantor loan, or personal contract purchase from a car dealership, you expect the lender to engage in responsible lending. A good industry practice by responsible lenders is conducting proper affordability checks on every borrower.

An affordability check or affordability assessment ensures you can make timely repayments for a loan. Affordability checks compare your monthly wage slips, bank statements, utility bills, car finance, and other expenses and debt to determine if you can afford the loan’s monthly payments.

Irresponsible lending isn’t your fault, and there are ways to proceed and protect yourself from financial difficulty. Read on to discover more.

Are you facing financial difficulties? Reach out today to request help with whatever you may need.

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