Discretionary Commission Arrangements - Complaints and Refunds
Moneyway is a trading name of Secure Trust Bank, a UK-based retail bank which was founded in 1952. The bank also owns the brands V12 Finance and Debt Manager. Moneyway is a self-funded (so not a broker) motor finance provider. Their main office is in Solihull, where they have a call centre, under-writers and a collections department.
As buying a car is quite often the second biggest purchase we make after buying a house, (and having a mortgage to acquire it) it is therefore of no surprise that on the whole, it is not feasible for most people to buy a car outright. A personal loan can of course be used to buy a car, so you borrow the amount needed to buy the car outright, and then make repayments to the lender. Advantages to this are that you do not need to find a deposit, you own the car from the start, and you can choose for how long you want the loan to run for. However, a competitive and manageable APR may not be available, especially if your credit score/rating is less than great, and you may pay a penalty if you wish to settle the loan earlier than stated in the agreement.
Motor finance is a specialised loan which typically covers most vehicles such as cars, vans, motorbikes etc, as long as they are less than eight years old at the start of the agreement, and less than twelve when it finishes. Equally, the “buyer” must be at least 18 years old, and a UK resident. The motor finance market is huge; at least 81% of new cars are being bought using a Car Finance agreement, according to the Financial Leasing Authority. Most lenders or showrooms offer several finance products, the most common being HP (Hire Purchase), PCP (Personal Contract Purchase) and Conditional Sale. The difference between these and a Personal loan agreement for the purchase of a vehicle is that the lender owns the car until the borrowed amount (plus interest) has been paid off in full. You do of course have full use of the car over the period of the agreement, and if you choose to, you can keep the vehicle at the end of it.
Let’s start with HP, or Hire Purchase, as this is the most simple form of vehicle finance. The cost of the car, plus the interest, are spread across a set period. May people opt for this type of agreement as the monthly payments never change (so has a fixed interest rate), and there is no big repayment at the end to keep the car. In addition, you don’t always have to put down a deposit, although putting one down (or using your old car as a deposit) will bring down the monthly cost. It’s a pretty straightforward calculation for the agreement figures for HP– the lender calculates the price of the car (after the deposit is deducted if used) with the added interest, then simply divides it by the number of months in the agreed term; this is usually between 24 and 60 months. It should be noted that the car is used as security against the loan (in the same way that a house is the security for a mortgage), and you only own the car once you have made the final payment. So, for example, you cannot sell the car without permission from the lender (although it can be returned). Other features of HP that may be seen as an advantage are that there are no annual mileage restrictions or conditions, or punitive charges for wear and tear. One disadvantage of HP is that if you miss one payment, the lender could choose to repossess the vehicle.
A Personal Contract Purchase is slightly more complicated; typically the monthly payments (over a fixed period) are smaller than with HP agreement (plus you pay a deposit) as some of the cost of the vehicle is deferred until the end of the contract. Once you are at the end of the agreement, there is the option to pay a lump sum (known as a balloon payment). This lump sum means you have purchased the vehicle outright. You can also choose to return the vehicle or, to pay off the remainder of the loan, sell it privately. Differing from the HP terms and conditions, a PCP is based on a minimum guaranteed future value, and is most suited to those who wish to change their vehicle on a regular basis. Equally, there are agreed mileage limits that must be adhered to (based on your estimation), and you have to keep the vehicle in tip top condition or risk a penalty. Fundamentally, you are ‘hiring’ the vehicle, and do not own it. This type of agreement typically runs from between three and five years.
Finally, looking at Conditional Sale, this is similar to HP, but you automatically own the vehicle at the end of the agreement, once you have made the final payment. Monthly payments are generally higher than with HP, but there is no larger payment at the end. This is ideal for those who want to keep the car, but do not want to have to find a large payment to secure it at the end of the agreement.
While you may be reading this article about Moneyway as you have had or are thinking about having a Motor Finance agreement with them, Moneyway wasn’t always just a motor finance provider. They also had the brand Moneyway OneBill, or Moneyway Secure Homes, whereby customers would pay a monthly fee and all their utility bills were managed and “paid” by Moneyway. Possibly due to the complaints about charges and PPI which customers said were extortionate, this arm of the business closed. Moneyway also stopped lending in the subprime market in 2017 and it has worked to establish itself in the prime and near prime motor finance market.
So, back to Moneyway and their Motor Finance deals. Moneyway’s representative APR is around 15%, but some customers do obviously pay a fair amount more. Interestingly, on their website, Moneyway state that “Moneyway is all about helping our dealer and broker partners get the best motor finance deal for their customers as simply and quickly as possible” before they go on to mention their mission for customers. Their website is not geared up to easily find out how much finance would cost as a customer which is a shame as being able to compare with other vehicle finance providers would be really useful, and it actually seems to be more focused on recruiting dealers and brokers to become a Moneyway partner – maybe I’m being cynical, but this is how it appears.
Aside from the usual mis-sold loan complaints, many of Moneyway’s poor reviews are to do with painfully high interest charges – one customer was distraught at borrowing £20,000 and finding out that they were paying back £35,000, so paying interest of £15,000. Other complaints that crop up are that Moneyway make it very difficult and discourage settling an agreement early; one customer claims that they were asked “Why would you want to settle it? Why pay for it all now?” and the customer’s response was obviously that they didn’t want to pay even more finance.
Overwhelmingly though, complaints against Moneyway are about mis-selling, and in their latest numbers, for Financial Ombudsman held up nearly half of the complaints against Moneyway’s owner Secure Trust Bank Plc. The typical complaints that fall under mis-selling are that the vehicles were faulty or of an unsatisfactory quality, the car and/or finance agreements were not described satisfactorily, they were unaware of certain charges (e.g., at the end of the agreement) or they cannot afford the agreement or were treated unfairly when they experienced financial difficulty.
Many customers of Moneyway, (and other similar vehicle finance companies such as AutoMoney Motor Finance, Billing Finance, Moneybarn, Blue Motor Finance to name a few) have complained that they failed to check that the loan was affordable to them and that they did not make sure that the customer was likely to be able to make the repayments for the duration of the loan. A loan being affordable is a key concept in any loan, and many borrowers are not aware of the practical meaning of this. So, a borrower may believe that if they make all their car finance payments on time, it is deemed to be “affordable”. In recent years the FCA (Financial Conduct Authority) has become increasingly focussed on guiding consumers into better value car finance deals, with affordability being the key. This has in turn led to an increase in new regulations and stricter enforcement. Consumers are realising that they can complain successfully about a car finance loan from companies like Moneyways Motor Finance that has left them worse off or left them in debt.
Many borrowers make their car finance repayments a priority as often the vehicle is absolutely necessary for getting to and from a place of work, or to take children to school etc., and consequently they have increasing credit card balances or have to rely on further loans to pay basic household bills. So, even if the car loan repayments are up to date, if this is to the detriment to the rest of the borrower’s finances, it is not affordable. Complaints have also been made about vital checks such as evidence of income, credit record check and verification of outgoings not being nearly comprehensive enough. A borrower may very well breathe a sigh of relief at not being made to provide huge amounts of financial information, especially if they are concerned that poor spending habits (such as gambling) or multiple other loans or even arrears on other loans, and the loan being granted. However, loan companies have a duty of care to scrutinise a potential borrower’s financial history and situation; in not doing so, and offering finance in the knowledge that the person may default, is not acceptable, and is something that can successfully be complained about.
Claims Management companies like Redbridge Finance has helped many customers who feel that they were mis-sold vehicle finance, based on the issues mentioned above; we can investigate the thoroughness of checks, or as the Financial Ombudsman Service puts it, “reasonable and proportionate checks”, to ensure that the borrower was able to make the repayments for the whole duration of the loan. We can represent you and your claim that you were unable to afford the loan and if we do not agree with the lender’s decision (this being a “no” to a refund or compensation, or an offer that we feel is too small), we will then pass your case on to the Financial Ombudsman.
These complaints may take many months. You will have to keep up the loan repayments during this time, or your car may be repossessed.