Discretionary Commission Arrangements - Complaints and Refunds

You do not need to use a Claims Management Company. You can make the claim directly to the lender and if they reject your complaint you can take it to the Financial Ombudsman Service free of charge, but you must do this within 6 months of the lenders Final Decision Letter.


Specialist Motor Finance Limited, based in Chester and employing 65 employees, was established in 2014, and is part of the IM Group, an international private business based in Solihull. IM Group (founded in 1976) companies are operational in mainly the automotive and property markets. Specialist Motor Finance Ltd., is authorised and regulated by the Financial Conduct Authority for consumer credit activities, and specialises in Hire Purchase (HP) agreements. According to them, the company has lent over £100 million to customers to date.

What is a Hire Purchase Agreement and how does it differ from PCP (Personal Contract Payment)?

Hire purchase is one of the most popular ways to finance a used car since it doesn’t normally come with age or mileage restrictions. In fact, over 57% of people who bought a used car on finance in 2020 did so through hire purchase, according to the Finance and Leasing Organisation.

Hire Purchase (HP) and Personal Contract Payment (PCP) are the two most popular forms of vehicle finance in the UK. The essential difference between the two is that with HP you own the vehicle outright at the end of the agreement, and with PCP, you have three options; you can hand the vehicle back, own it outright by paying a “balloon” payment (usually a fair amount as the monthly payments are typically lower than those paid under an HP agreement) or exchange the vehicle for a new/different one. With both HP and PCP finance, the provider of that finance owns the car, with the customer being the registered keeper.

So, HP is a finance option enabling the customer to spread the cost of buying a vehicle over a period of time, rather than paying for it in one go, and the loan provided equals the total value of the car you are buying, minus of course the amount of the deposit paid upfront. This is typically at least 10% of the car’s value. Some lenders do offer a 0% deposit option – it is worth remembering that the smaller the deposit, the higher the monthly payments will be, and vice versa. The payments are made in monthly instalments over a fixed term, with a fixed interest rate. These agreements usually run for a pre-agreed term of between one and five years, although some car finance companies do offer a seven-year term.

The monthly repayment amount is determined using the value of the vehicle (when you sign the agreement), along with the amount of interest due. This figure is then divided by the length of time you would like the agreement to run over. It follows that the longer the term, the lower the monthly payments will be. The interest rate, with any lender, is based on the customer’s credit rating; the better the score, the lower the interest rate, as the lender deems you less of a risk.

PCP differs somewhat in that, rather than covering the total cost of the car (as with HP), the monthly payments cover the estimated depreciation of the vehicle; PCP monthly repayments are generally lower than those with an HP agreement, as the monthly instalment does not total the initial cost of the car by the time the contract ends. Rather, the lender approximates how much the car will be worth when the contract ends (this is known as the Guaranteed Minimum Future Value or GMFV),

And thus, the repayments cover the difference between this figure and the initial value of the car. So as mentioned above, one of the three options you have at the end of a PCP contract is to make a “balloon” payment to finally own the car, and this payment is based on the car’s GMFV.

So, who might consider Hire Purchase when buying a car? If you want to own the car at the end of the contract and you do not want to have to fork out on a big “balloon” payment to secure that ownership, you do not want any restrictive mileage limits, and you know that can afford the monthly repayments (the total of which are typically lower than the total you would pay with a PCP contract), then Hire Purchase is probably the most suitable type of finance.

What are some advantages of HP?

  • If you don’t have a lump sum of cash to spend on a car, it helps to spread the cost over a period of time.
  • Interest rates are fixed so you know how much you have to pay each month.
  • You only have to provide a comparatively small deposit at the start of the agreement.
  • You own the car at the end of the agreement.
  • Those with poor or little credit history are able to buy a car as the car is used as security for the finance.

What are some disadvantages of HP?

  • You are not the legal owner of the car until you’ve made all the payments, just the registered keeper, so you are not generally allowed to modify or sell the car.
  • After missing just two payments, many car finance companies may repossess the car.
  • The monthly instalments could be higher than other finance options, for example, PCP, as HP covers the cost of the whole car and does not take depreciation into account.
  • Because you have to pay interest, you will end up paying more in total than if you paid for the car upfront in cash.

More about Specialist Motor Finance and why you should be cautious.

SMFL as mentioned above, offer Hire Purchase contracts for those wanting to finance their new car. In 2019 they were named as one of the Sunday Times’ “Best Companies”; through their partnerships with brokers, dealer groups and independent car dealers, they claim to ensure that customers receive a flexible finance solution, thus facilitating that “valuable sale”. In February 2022 SMFL won the Feefo Gold Trust Service award for the second year running (Feefo apparently being the world’s largest verified buyer reviews platform) an award that Feefo introduced in 2014 to acknowledge businesses that deliver “exceptional experiences”.

Specialist Motor Finance Limited claim to have a “responsible and flexible” approach to motor finance, in that they provide financial products which are comparable to traditional prime lenders, such as High Street banks, but with a less narrow or inflexible perspective.

SMFL stated in 2019 that its focus would remain on a growing sector of car buyers isolated from mainstream/prime borrowing, even if they could prove that they could afford a loan to buy a car. This also would include those who had come to the end of an agreement with a traditional lender, and then found themselves no longer acceptable to said lenders. This could be due, for example, to tougher borrowing criteria or minor credit hiccups occurring during the term of the loan. Customers like this, SMFL argue, are not necessarily in financial difficulty, and affordability checks frequently exhibit comfortable earnings within reliable employment. This is leading to a group of potential customers being abandoned in a middle ground of credit damage, as distinct from “high risk.” SMFL managing director David Challinor, believes that these middle ground credit borrowers can be catered for within “one of SMFL’s 10 lending tiers where fixed APR rates vary from 19% to 39% with no hidden fees or charges”. Challinor also cites SMFL’s credit scoring process, which integrates with an advanced method of assessing the affordability profile of its clients.

Nevertheless, and despite this alleged sophisticated system to assess credit-worthiness, SMFL along with several other vehicle finance companies such as Billing Finance, Moneyway, Moneybarn and Blue Motor Finance, to name a few, have been the subject of many complaints about the affordability of the loan. I will expand on this in the next section. Looking at the reviews and complaints about SMFL, apart from the affordability issue, one of the main problems that customers have with Specialist Motor Finance Ltd., is that of the quality of the vehicle they have “bought.” I have read numerous accounts where the customer quickly realises that the car they are buying has faults, often from the day they collected it, and SMFL appear to support the dealer who sold the faulty car rather than the customer with the finance arrangement. It appears that customers are frustrated with the lack of good customer service and fair treatment once the initial deal is done, claiming that the lender is unhelpful with getting the car back on the road; I assume that as the payments are still coming in from the customer, making sure that the car is roadworthy becomes less of a priority than securing a new deal.

Another complaint about SMFL, along with other car finance lenders, is that if a customer’s circumstances change that will affect their finances (e.g., redundancy), and the customer is fearful that they will fall behind with payments, then SMFL are unhelpful, do not listen or are unfair in their dealings.

So, what is meant by a loan being “unaffordable”?

As a borrower, you might be under the impression that if you are able to make monthly car instalment payments on time and in full, then it follows that the loan is “affordable.” However, the Financial Conduct Authority (FCA) and Financial Ombudsman Service (FOS) look at the bigger picture and assert that any loan is only affordable if you can make the repayments on time, while at the same time being able to comfortably meet other financial undertakings. If this is not the case, then the customer may have been mis-sold the finance. Customers who are struggling therefore should not regard their car finance in isolation. For many of us, a car or van is absolutely essential for travelling to and from work, and consequently, car finance repayments are prioritised; this factor can easily lead to other household bills causing difficulties, often solved by taking out further loans to cover them, or using a credit card. This obviously leads to growing credit card balances or more loan repayments. So, customers finding themselves up to date with their car payments, but struggling financially to manage and meet the rest of their monthly outgoings, have to understand that the car loan was not affordable when sold to them by the lender, and it was mis-sold. Customers of SMFL and other car finance companies have complained that essential checks (e.g., evidence of income/credit record check etc.) were not sufficiently rigorous, and as a result, they cannot afford to pay all their bills on time and in full, leaving them much worse off over time. Some SMFL customers have gone through the process of trying to get a refund, or compensation, as they were given finance, despite having a bad credit record perhaps detailing other recent or active loans, payment defaults or evidence of regular gambling activity for example; if the lender had been thorough, this record would have sent alarm signals indicating that the borrowers financial position was bad, and getting worse.

Redbridge Finance has helped many customers who feel that they were mis-sold vehicle finance, based on the issues mentioned above. We can also 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.

If you successfully claim a refund from a lender, you can claim back the interest and charges on your loans, plus, typically, 8% statutory interest. To make a successful and legitimate unaffordability claim against Specialist Motor Finance Limited, you will need to pursue your claim within three years of realising you may have made a claim. This period is referred to as from the date of knowledge. Also, please bear in mind that these complaints may take many months. You will have to keep up the loan repayments during this time, if applicable, or your car may be repossessed.