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Were You Sold a Car on Unaffordable Finance?
Did you drive away with the keys to a new car, only to realize the finance was unaffordable from the start?
According to the Financial Conduct Authority (FCA), which regulates car finance lenders, and the Financial Ombudsman Service (FOS), a loan is only considered affordable if you can make the repayments on time without experiencing financial hardship and while still meeting your other financial commitments, such as debts, household bills, and living expenses.
If you prioritized your car finance payments to avoid repossession, this might have led to increased credit card balances, additional loans, or falling behind on other bills. Even if you managed to keep up with the car payments, the loan may not have been truly “affordable.”
Unaffordable Loans?
According to the Financial Conduct Authority (FCA), which regulates car finance lenders, and the Financial Ombudsman Service (FOS): A loan is only considered affordable if you can make the repayments on time, without experiencing financial hardship, and still meet your other financial commitments.
A Definition
Affordable means you should be able to cover all your other debts, household bills, and living expenses in addition to the car loan payments and not be forced to use credit cards and loans for other areas such as mortgages.
Compensation
In UK law, the situation described above typically falls under the category of "irresponsible lending" or "unaffordable lending." If a loan is deemed unaffordable, borrowers may be entitled to redress, such as a refund of interest or fees, or adjustments to the terms of the loan.
Victim of Irresponsible Loans
"irresponsible lending" or "unaffordable lending." This refers to situations where a lender fails to properly assess whether a borrower can afford a loan without undue financial hardship, as required by regulations set by the Financial Conduct Authority (FCA).
Your Rights
Lenders must assess whether the borrower can make repayments without compromising their ability to meet other financial commitments, such as household bills or living expenses. Consumer Credit Act 1974: This law regulates consumer credit agreements, including car finance, and provides protections for borrowers.
Recourse
Breach of FCA Rules: The FCA requires lenders to ensure loans are affordable, and failure to comply can lead to a complaint through the Financial Ombudsman Service (FOS) or legal action. If a loan is deemed unaffordable, borrowers may be entitled to redress, such as a refund of interest or fees, or adjustments to the terms of the loan.
You could be owed £Thousands
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