Advice needed on taking finance company to court

Myci85

After some advice please, sorry its lengthy!

My OH agreed in 2015 to be a guarantor for a 'friend' to help him buy a van. His friend was bankrupt so my OH stupidly agreed for the payments etc to come from his bank, with his friend paying him. 

Fast forward to 2022, we're trying to improve his credit score to enable us to buy a house, and it's not great due to his friend stopping making payments for this van about 3 years ago, with multiple missed payments before that. When he told me about all of this, I pointed out he should never have been accepted as guarantor as he wasn't earning enough at the time. He tried to contact the finance company and they ignored him, so he took it to the financial ombudsman. We've gone as far as we can with them and they've decided that he should have known in 2015 it was not affordable and have complained sooner, and as 6 years have passed, they can't consider the complaint. This particular finance company I know has not won any of the complaints taken to the ombudsman on grounds of affordability checks (I've read through all the history on ombudsman site) as they have never been able to prove they lent responsibly, so I'm certain if it was within the 6 year timescale, my OH would have won. 

Now as the complaint went on, my OH had a hunch that the paperwork was changed at the time his friend took out the finance, and my OH was put down as the sole applicant. The final decision from the ombudsman has indeed confirmed he is shown as the sole applicant. My OH has no paperwork to check, and he is dyslexic so stupidly just signed the documents based on what they told him at the time. 

I want to know if he would have a case to take the finance company to court? I am 90% certain the company never did the affordability checks they should have done, and whilst I'm not sure how he could prove that he was told he was being guarantor, he had no driving licence until 4 years later, so I don't know how they could say the van was being financed for him?

Any advice would be gratefully received, as until we can sort this out, any hope of getting a mortgage is non existent.

Exodi

I personally think court will be a waste of time and money, but others may disagree.

Myci85 said:

Any advice would be gratefully received, as until we can sort this out, any hope of getting a mortgage is non existent.

Could you expand on this please?

If I'm understanding you correctly, in 2015 your OH takes out finance on a van on behalf of his bankrupt friend and the finance company were taking payments from your OH directly (for all intents and purposes the finance agreement was with your OH - this is often the case with guarantor finance agreements). Your OH's friend was then reimbursing your OH.

Then some time in 2019, your friend stops reimbursing your OH for the van payments. To be crystal clear because it's important, did your OH just stop paying the finance company for the van at this point? You kind of skim over this point:

Myci85 said:

Fast forward to 2022, we're trying to improve his credit score to enable us to buy a house, and it's not great due to his friend stopping making payments for this van about 3 years ago, with multiple missed payments before that.

If it is the case that your OH defaulted in 2019 - did he just stop all together or was he making payments on and off? What happened to the van, was it returned to the finance company?

Defaults fall off credit reports in 6 years, so you may have to plan around a mortgage in 2025.

I imagine you've said it all to your OH already, but acting as a guarantor for someone that is bankrupt probably wasn't the wisest idea...

sourcrates

Taking them to court will be a costly affair, as you will need a solicitor, who will have to do some hard digging around to find evidence that might not even exist, its quite likely the cost of legal action would far outweigh anything you might be able to claim back from them, and that`s if you win.

If you lost you could end up having to pay their costs as well as your own, and the result may very well leave you with nothing.

Honestly it`s a bad idea.

Myci85

Exodi said:

I personally think court will be a waste of time and money, but others may disagree.

Myci85 said:

Any advice would be gratefully received, as until we can sort this out, any hope of getting a mortgage is non existent.

Could you expand on this please?

If I'm understanding you correctly, in 2015 your OH takes out finance on a van on behalf of his bankrupt friend and the finance company were taking payments from your OH directly (for all intents and purposes the finance agreement was with your OH - this is often the case with guarantor finance agreements). Your OH's friend was then reimbursing your OH.

Then some time in 2019, your friend stops reimbursing your OH for the van payments. To be crystal clear because it's important, did your OH just stop paying the finance company for the van at this point? You kind of skim over this point:

Myci85 said:

Fast forward to 2022, we're trying to improve his credit score to enable us to buy a house, and it's not great due to his friend stopping making payments for this van about 3 years ago, with multiple missed payments before that.

If it is the case that your OH defaulted in 2019 - did he just stop all together or was he making payments on and off? What happened to the van, was it returned to the finance company?

Defaults fall off credit reports in 6 years, so you may have to plan around a mortgage in 2025.

I imagine you've said it all to your OH already, but acting as a guarantor for someone that is bankrupt probably wasn't the wisest idea...

Thank you both for your replies. 

We have been told by a mortgage advisor that until the finance company agree to wipe it off his credit file as unfair lending, he stands little chance of being accepted for a mortgage, and my income alone won't go far for one. 

No payments have been made at all since 2019, sporadic payments before that, and his 'friend' still has the van. The remaining debt is just over £1k, so not huge. I know that defaults fall off credit reports 6 years after they are made, however looking at my OH's credit file, they never defaulted it as far as I can see. Since 2019 it has just shown as 4 on the arrears (4 months not paid), so I don't know if it will ever fall off his file? Also, in complaining to the finance company, and then the FO, I'm unsure if that would count as him acknowledging the debt, so the 6 years would restart from that date last year.

I understand that guarantors are equally as responsible for paying a debt as the applicant, but the FO confirmed that all the paperwork they've seen has been with my OH as sole applicant. I have absolutely shared my feelings with him over how bleeding irresponsible it was to agree to do it in the first place (we were not living together then and I didn't know about it to give him a reality check at the time), but I am just so angry that it looks like his 'friend' and the finance company (the member of staff who dealt with the application being well known to said 'friend') appear to have knowingly shafted him. The FO even shared that the initial application had been declined and they had pushed it through underwriting to get it to be accepted. 

I just literally have no idea where to go from here. Our landlady is wanting to sell in the next year or so, and I want to avoid another rental as we're on a very good rate here and have be able to save, but if we have to rent a different place, I know all our income will go on barely managing rent payments plus bills. 

Myci85

I have also found that by putting the finance in OH's name, the application was fronted, which is illegal, however like you said with no paperwork or anything to prove OH was not intending to be main applicant, how do we prove it was the finance company that acted fraudulently. I don't know if the fact he had no driving licence at all, not even provisional, at this time would make any difference, or if that isn't a requirement to buy a vehicle on finance. 

Taking them to court would be less about any financial gain, and more about getting them to take responsibility and wipe the information off his credit file. But we aren't in a position to fork out god knows how much if we lose. 

fatbelly

Myci85 said:

Thank you both for your replies. 

We have been told by a mortgage advisor that until the finance company agree to wipe it off his credit file as unfair lending, he stands little chance of being accepted for a mortgage, and my income alone won't go far for one. 

No payments have been made at all since 2019, sporadic payments before that, and his 'friend' still has the van. The remaining debt is just over £1k, so not huge. I know that defaults fall off credit reports 6 years after they are made, however looking at my OH's credit file, they never defaulted it as far as I can see. Since 2019 it has just shown as 4 on the arrears (4 months not paid), so I don't know if it will ever fall off his file? Also, in complaining to the finance company, and then the FO, I'm unsure if that would count as him acknowledging the debt, so the 6 years would restart from that date last year.

I understand that guarantors are equally as responsible for paying a debt as the applicant, but the FO confirmed that all the paperwork they've seen has been with my OH as sole applicant. I have absolutely shared my feelings with him over how bleeding irresponsible it was to agree to do it in the first place (we were not living together then and I didn't know about it to give him a reality check at the time), but I am just so angry that it looks like his 'friend' and the finance company (the member of staff who dealt with the application being well known to said 'friend') appear to have knowingly shafted him. The FO even shared that the initial application had been declined and they had pushed it through underwriting to get it to be accepted. 

I just literally have no idea where to go from here. Our landlady is wanting to sell in the next year or so, and I want to avoid another rental as we're on a very good rate here and have be able to save, but if we have to rent a different place, I know all our income will go on barely managing rent payments plus bills. 

I think you need a different mortgage adviser. One default should not make a huge difference and according to you there is not even one default showing. Maybe you need one that specialises in adverse credit.

For guarantor loans the application is made in the guarantor's name. If approved, the loan is sent to the guarantor rather than the borrower and they will then forward it. This is to prevent fraud. So it's not clear to me that this application is wrong.

As FOS have said they can't consider your complaint, you are correct that court remains your only option. I would expect them to respond with a counterclaim and if the judge ruled that the money was owed, a ccj would be issued against your OH. 

As only just over £1k is owed, why not do some 'without prejudice' negotiations, in writing, and offer a lump sum in exchange for them clearing the credit report completely. They may not agree but at least getting the reported balance to zero should help a bit.

Annisele

Unfortunately I think you've got more chance of successfully suing the friend that the finance company - but that'll be a hollow victory if the friend doesn't have any money.

It sounds as though if you sue the finance company, it will be able to show that your OH signed paperwork to take out a loan in his own name. Your OH didn't pay that loan, so the finance company correctly reported the situation to the credit reference agencies. The fact your OH can't drive is beside the point so far as the finance agreement is concerned, because people are allowed to own cars even if they can't drive them.

If you were to sue the friend on the other hand, there's unlikely to be any paperwork and it'd likely come down to your OH's word against the friend's. On the face of it would be odd for OH to have generously agreed to provide a free van for his friend - and the fact the friend did make payments in the past might be considered evidence that friend was supposed to be reimbursing OH for the payments.

Is friend still a friend, or is he now an ex-friend? Does the friend know how badly he's screwed OH over? Is friend able and willing to make any payments in recompense?

I think that whether or not another mortgage broker would be able to help is likely to depend on the rest of your situation. If you're looking for a 95% mortgage and you're right on the edge of affordability, unfortunately this situation might make it impossible for you to get a mortgage at all. At the other end of the scale, if you're looking at 60% LTV and you want to borrow 2x salary I'd expect you have options.

Myci85

fatbelly said:

Myci85 said:

Thank you both for your replies. 

We have been told by a mortgage advisor that until the finance company agree to wipe it off his credit file as unfair lending, he stands little chance of being accepted for a mortgage, and my income alone won't go far for one. 

No payments have been made at all since 2019, sporadic payments before that, and his 'friend' still has the van. The remaining debt is just over £1k, so not huge. I know that defaults fall off credit reports 6 years after they are made, however looking at my OH's credit file, they never defaulted it as far as I can see. Since 2019 it has just shown as 4 on the arrears (4 months not paid), so I don't know if it will ever fall off his file? Also, in complaining to the finance company, and then the FO, I'm unsure if that would count as him acknowledging the debt, so the 6 years would restart from that date last year.

I understand that guarantors are equally as responsible for paying a debt as the applicant, but the FO confirmed that all the paperwork they've seen has been with my OH as sole applicant. I have absolutely shared my feelings with him over how bleeding irresponsible it was to agree to do it in the first place (we were not living together then and I didn't know about it to give him a reality check at the time), but I am just so angry that it looks like his 'friend' and the finance company (the member of staff who dealt with the application being well known to said 'friend') appear to have knowingly shafted him. The FO even shared that the initial application had been declined and they had pushed it through underwriting to get it to be accepted. 

I just literally have no idea where to go from here. Our landlady is wanting to sell in the next year or so, and I want to avoid another rental as we're on a very good rate here and have be able to save, but if we have to rent a different place, I know all our income will go on barely managing rent payments plus bills. 

I think you need a different mortgage adviser. One default should not make a huge difference and according to you there is not even one default showing. Maybe you need one that specialises in adverse credit.

For guarantor loans the application is made in the guarantor's name. If approved, the loan is sent to the guarantor rather than the borrower and they will then forward it. This is to prevent fraud. So it's not clear to me that this application is wrong.

As FOS have said they can't consider your complaint, you are correct that court remains your only option. I would expect them to respond with a counterclaim and if the judge ruled that the money was owed, a ccj would be issued against your OH. 

As only just over £1k is owed, why not do some 'without prejudice' negotiations, in writing, and offer a lump sum in exchange for them clearing the credit report completely. They may not agree but at least getting the reported balance to zero should help a bit.

Thank you. When my OH tried over a year ago to contact the finance company about the matter, they completely ignored all contact, so I'm unsure if they would also ignore an attempt to negotiate a lump sum payment in return for them clearing his report, but it is definitely something to consider trying. Particularly as the way things stand at the moment, I can't see that the finance company have defaulted the loan, and so for the past 3 years it is showing on his report as the amount owed, 4 months in arrears. If they never default it, I'm thinking it will continue to show like that on his report and so even waiting out 6/7 years for things to come off a report will make no difference. 

Annisele said:

Unfortunately I think you've got more chance of successfully suing the friend that the finance company - but that'll be a hollow victory if the friend doesn't have any money.

It sounds as though if you sue the finance company, it will be able to show that your OH signed paperwork to take out a loan in his own name. Your OH didn't pay that loan, so the finance company correctly reported the situation to the credit reference agencies. The fact your OH can't drive is beside the point so far as the finance agreement is concerned, because people are allowed to own cars even if they can't drive them.

If you were to sue the friend on the other hand, there's unlikely to be any paperwork and it'd likely come down to your OH's word against the friend's. On the face of it would be odd for OH to have generously agreed to provide a free van for his friend - and the fact the friend did make payments in the past might be considered evidence that friend was supposed to be reimbursing OH for the payments.

Is friend still a friend, or is he now an ex-friend? Does the friend know how badly he's screwed OH over? Is friend able and willing to make any payments in recompense?

I think that whether or not another mortgage broker would be able to help is likely to depend on the rest of your situation. If you're looking for a 95% mortgage and you're right on the edge of affordability, unfortunately this situation might make it impossible for you to get a mortgage at all. At the other end of the scale, if you're looking at 60% LTV and you want to borrow 2x salary I'd expect you have options.

Said 'friend' is now an ex friend, unsurprisingly. From what we can see he is running a very successful company and buying very expensive new equipment for it, so I feel he should have the means to pay it off. My OH doesn't think he will willingly do so as he's asked him before to start paying it again, however I think it is definitely worth a try. Like you say, the trouble with trying to sue him is lack of evidence, other than him making those payments to my OH back when he was. Unfortunately my OH no longer has access to any messages between them at the time that would have proved he was asking him to be guarantor for him. 

We are indeed in the position of requiring a 95% mortgage, and at max income multiples realistically to get a house to fit our needs. I'm trying to decide if paying off the remaining debt out of our deposit savings would be our best way forward, or if the 3 solid years of the account showing as 4 months in arrears on his report would still make it impossible. His credit score has been increasing, his clearscore was showing mid 500s last time he checked, but the mortgage advisor said your credit score is meaningless, it's what shows on your report that will influence a decision. 

_Penny_Dreadful

Myci85 said:

I have also found that by putting the finance in OH's name, the application was fronted, which is illegal, however like you said with no paperwork or anything to prove OH was not intending to be main applicant, how do we prove it was the finance company that acted fraudulently. I don't know if the fact he had no driving licence at all, not even provisional, at this time would make any difference, or if that isn't a requirement to buy a vehicle on finance. 

Taking them to court would be less about any financial gain, and more about getting them to take responsibility and wipe the information off his credit file. But we aren't in a position to fork out god knows how much if we lose. 

Initially you said your OH was a guarantor and now you mention him being the main applicant. Who actually owns the van? What kind of finance is this? Personal loan, higher purchase or PCP? 

Myci85

_Penny_Dreadful said:

Myci85 said:

I have also found that by putting the finance in OH's name, the application was fronted, which is illegal, however like you said with no paperwork or anything to prove OH was not intending to be main applicant, how do we prove it was the finance company that acted fraudulently. I don't know if the fact he had no driving licence at all, not even provisional, at this time would make any difference, or if that isn't a requirement to buy a vehicle on finance. 

Taking them to court would be less about any financial gain, and more about getting them to take responsibility and wipe the information off his credit file. But we aren't in a position to fork out god knows how much if we lose. 

Initially you said your OH was a guarantor and now you mention him being the main applicant. Who actually owns the van? What kind of finance is this? Personal loan, higher purchase or PCP? 

Yes, so he agreed to be guarantor for the finance, it was car finance, not sure which type but not a personal loan. However when the FOS looked into it, they have confirmed my OH's suspicions that he was actually listed as the sole applicant. The van has always been owned by his 'friend'.

Exodi

I think given the circumstances (including the lack of evidence), the fact that what you described is pretty typical for a guarantor agreement (it's more likely your OH has misremembered) and that the amount owed is relatively small (about £1k) while seemingly hamstringing your mortgage, I think you'd be mad not to offer a F&F or just pay it all off now.

When I applied for my last mortgage, they asked for details of any outstanding loans and repayment plans. It would not be a good look to go into a big rant about collusion, forgery, insurance fronting, fraud, etc.

It is very common on this forum (and in all walks of life) to attribute blame where it is easiest to do so.

You're obviously frustrated at your OH for his naivety, you're obviously angry at the friend for stitching your OH up, but you focus your rage and vitriol at the faceless finance company, going as far as escalating to the FOS and now talking about court.

Myci85 said:
Unfortunately my OH no longer has access to any messages between them at the time that would have proved he was asking him to be guarantor for him. 

I would have suggested thinking about sueing the friend, but given your OH no longer has access to any evidence of this arrangement either, I'd honestly just pay it and move on. Life's too short.

Even if your OH can show that he should have been listed on the agreement as a guarantor and not sole applicant, he clearly has not met his obligations as a guarantor (to cover payments in any eventuality) - after all, the payments were being taken from his bank account. I don't think it matters much what says what on the agreement, your main point seems to be that he should not have met affordability as either a sole applicant or guarantor.