Loan provider revokes loan after agreement is signed

Hi,

I recently entered into an HPA with a well known credit provider. I was initially pre-approved by a credit broker, who referred me to the provider. The provider then sought my consent to perform a hard search, which I gave. The broker and the provider then both confirmed that the provider was satisfied with the results of the hard search.

The garage I was purchasing the car from called me 2 days later to confirm that it had received all of the necessary documentation from the provider and to iron out the details (customisation options etc.) of the purchase. I spoke with the provider directly on the same day to confirm that everything had been finalised and to request a copy of the HPA. The provider assured me that everything had been approved on the same day that the hard search had been performed, and that the HPA was being generated in its system and would follow in due course. The following day - 4 days after the hard search had been performed - I received the pre-signed HPA. The contract states that it becomes legally binding as soon as I sign it. It explicitly provides the date and time at which the provider signed the contract and at which I signed the contract - this date and time is shortly after the hard search was performed i.e., 3 days prior to my receiving the contract itself. 

Two days later, the broker called me to advise that the provider had declined my application for finance, and requested additional documents from me so that it could approach other lenders. I've explained that I have a legally binding contract with the provider and that I intend to pursue the matter with the provider before considering further options.

The termination clauses in the HPA are typical of such contracts. There are the usual clauses referring to default, which obviously can't be invoked yet since I haven't even taken possession of the vehicle - the first payment is due 30 days after I take possession. The only two clauses that could feasibly be invoked are clauses pertaining to misrepresentation of my circumstances (in other words, lying on the application), or a material change in financial circumstances (e.g., bankruptcy or insolvency). I'm confident that I provided an honest account of my circumstances at the application stage. Even had I erred, knowingly or unknowingly, the provider had the opportunity to ascertain my financial circumstances at the stage at which it performed the hard search. It signed the contract after it had performed the hard search, however, and issued it to me days after the fact without qualification.

I've written to the provider to request further information. Specifically, I want to know what clause it is invoking to terminate the contract, and the grounds for it doing so. I spoke with a retired solicitor who is a family friend, and they advise that the provider can no longer decline finance as it has already entered into a legally binding contract with me. In other words, we have moved beyond the approval stage and are now bound to the terms and conditions of the contract. My solicitor friend advises that the provider's only recourse is to seek to invoke one of the termination clauses. I've tried to make an appointment with a solicitor to get some formal legal advice, but this won't take place until next week at the earliest. In the meantime, I'm worried about losing out on the vehicle, which I've already paid some money towards (it isn't clear if I would get this back if the sale falls through). Meanwhile, the hard search performed by the provider has tanked my credit score, and I'm no longer receiving as favourable terms when I apply for pre-approval via soft searches, so I'm reluctant to make any further applications.  

I've searched thoroughly for any similar cases to this, on the internet and here in the MSE forum, and I can't find anything. The assumption is always that the borrower is the one who is trying to get out of the HPA rather than the lender. Can anyone speak to a similar situation and let me know what the outcome was?

Many thanks.
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Comments

  • eskbanker
    eskbanker Posts: 29,811
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    pt6w said:
    the hard search performed by the provider has tanked my credit score
    Although credit scores are essentially made-up numbers, a single hard search shouldn't have a significant impact - are there any red flags on your credit files with any of the three credit agencies (the finance provider may not have been looking at the same one that you did)?
  • born_again
    born_again Posts: 13,552
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    Clearly something has spooked lender.
    I would be doing a SAR with CIFAS to see if anything is held on you there.

    I think you will find that they have a opt out clause in the T/C if something comes to light with further checks.
    Life in the slow lane
  • Okell
    Okell Posts: 607
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    edited 20 October 2023 at 11:40AM
    pt6w said:
    ...The only two clauses that could feasibly be invoked are clauses pertaining to misrepresentation of my circumstances (in other words, lying on the application), or a material change in financial circumstances (e.g., bankruptcy or insolvency). [1] I'm confident that I provided an honest account of my circumstances at the application stage. [2] Even had I erred, knowingly or unknowingly, the provider had the opportunity to ascertain my financial circumstances at the stage at which it performed the hard search... 
    Please forgive me for saying so, but for some reason I find that choice of words a little unconvincing(?).

    [1]  I always tend to find a bit insincere someone who tells me that they've told me an "honest" answer rather than a truthful and/or accurate one.  Don't know why but only saying "honest" always strikes me as rather evasive and not necessarily the same as truthful and/or accurate.  If I know that if I hadn't misrepresented something I would clearly and unequivocally say so - ie I gave an accurate and truthful answer.

    But perhaps I'm being unfairly pedantic in that regard...

    [2]  If you had erred, knowingly or unknowingly, then I think they can terminate the contract.  It's irrelevant whether or not they could have checked what you told them if what you told them was not accurate - even if "honest".


  • Pth80
    Pth80 Posts: 6
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    Hi,

    Thanks for responding.

    I can view my credit file with Experian using MSE' Credit Club. There are no public records (e.g., CCJs) linked to the account, no Cifas records, no late payments, and no defaults. The hard search doesn't show up on that file, and my score hasn't changed since the day the provider performed the hard search. However, ClearScore, which is supposedly linked to my Experian file, shows that my score has dropped as of 2 days ago i.e., after the hard search was performed. No other negative changes have occurred. In fact, an older hard search was removed and a contract (previous internet provider) was closed and recorded as up to date. Why ClearScore would have more up to date information pertaining to my Experian file than my Experian file itself is a mystery to me. My affordability score in ClearScore is high (75/100), however. 

    I can view my credit file with TransUnion via Money Supermarket. My score in fact increased 15 points the day after the credit provider performed the hard search and I even moved into a higher band. The hard search is recorded in my TransUnion file. My score increased because my electoral roll information was updated. I recently moved home - this information was provided to the credit provider at the application stage, along with my previous address, which I lived at for several years. There are no public records (e.g., CCJs) linked to the account, no Cifas records, no late payments, and no defaults. 

    The credit provider states that it works with TransUnion, so the latter would appear to be the file it referred to when approving the HPA, and would presumably be what it would refer to subsequently. TransUnion shows both hard and soft searches, and none have been performed since I applied for and was approved for the HPA.

    There is no clause that suggests that the provider can terminate the contract if something comes to light with further checks, or even a clause that states that further checks might be performed. The only clause that might allude to that is a clause that states that the provider can terminate the agreement if "you have provided incorrect information to us on which we relied when entering this agreement". To the best of my knowledge, the information I provided was and remains accurate, and I see no way that the provider could have determined otherwise at this stage.  

    Another clause states that the provider can terminate the contract if I "in our reasonable opinion appear to be insolvent or unable to pay your debts as they fall due". I'm not insolvent, nor do I appear to be insolvent. My disposable income amounts to almost half my monthly salary and, as I mentioned above, I always pay my obligations (rent, utilities etc.) on time. Again though, the provider had this information prior to entering into the agreement with me and nothing has changed since.

    All other clauses relate to failing to keep up repayments, maintain the vehicle, or keep it comprehensively insured.

    The broker suggested that the agreement might not come into effect until disbursement of funds, but there is nothing in the contract that implies that to be the case. It explicitly states that it becomes legally binding when both parties sign the contract. 

    I can only speculate that someone else at the provider's end has had another look and decided that the loan shouldn't have been offered - perhaps it was waived through by someone by accident - but can it really be so easy for a party to a legally binding contract to get out of its obligations simply by changing its mind?

    Thanks again. 
  • Wonka_2
    Wonka_2 Posts: 609
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    A very quick escalation there from a rejection to threats of legal action aren't necessarily 'normal' reactions so for clarity

    1) Are the Garage and the Broker the same ? If not what's their relationship ?
    2) Given the 'customisation' you talk is it a new car ? Something specialist or just mainstream and you're agreeing the order specification ?
    3) Have you spoken to, rather than writing to, the lender or received any written confirmation from them of what the Broker has told you ? And aligned with that did you complete the application or did the Broker complete it on your behalf ?
  • Okell
    Okell Posts: 607
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    edited 20 October 2023 at 12:38PM
    Wonka_2 said:
    A very quick escalation there from a rejection to threats of legal action aren't necessarily 'normal' reactions so for clarity...

    ... 3) Have you spoken to, rather than writing to, the lender or received any written confirmation from them of what the Broker has told you ? And aligned with that did you complete the application or did the Broker complete it on your behalf ?
    I was also going to suggest that the OP speak directly to the lender to find out what the problem was - rather than just relying on the broker's say so.

    I assume that if the OP hadn't completed the application themselves, that they would already have mentioned this?  (Or maybe not...  :/  )

    If what the OP has told us is true and accurate (and complete!) then the lender would appear to be in breach of contract.
  • Pth80
    Pth80 Posts: 6
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    Wonka_2 said:
    A very quick escalation there from a rejection to threats of legal action aren't necessarily 'normal' reactions so for clarity

    1) Are the Garage and the Broker the same ? If not what's their relationship ?
    2) Given the 'customisation' you talk is it a new car ? Something specialist or just mainstream and you're agreeing the order specification ?
    3) Have you spoken to, rather than writing to, the lender or received any written confirmation from them of what the Broker has told you ? And aligned with that did you complete the application or did the Broker complete it on your behalf ?
    1) The garage and the broker are not the same. The garage has been in direct contact with the lender as well as the broker. 

    2) Customisation is perhaps too strong a word. One of the alloys has been scratched. The dealer intends to refurbish all of the alloys. They asked me if I wanted them to be the same colour or a different colour. I said to keep them the same. That's due to happen tomorrow. The garage isn't aware of the situation yet and still thinks everything is going ahead.

    3) I've written to the lender. I spoke with the CAB (as well as my retired solicitor friend who doesn't specialise in consumer protection law) after the broker advised me of the lender's decision, and the CAB advised me to write and ask for clarification rather than speak to the lender on the telephone. I completed the application. I filled in a pre-application with the broker, which included providing details of the car. The broker then passed the pre-application to various lenders it works with. Once the lender offering the most favourable terms responded, I was directed to fill in an application directly with the lender itself - this included providing consent for the lender to perform a hard search. If the broker or any other party has provided any additional/contrary information to the lender subsequent to that, I'm unaware of the fact. Once the application had been approved, I began speaking with the lender directly rather than with the broker. This only changed when the broker called me to tell me that the lender had now 'declined' the offer. The broker seemed surprised when I told them that I had a signed agreement.
  • Pth80
    Pth80 Posts: 6
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    Oh, and it's a used car, 7 years old, in immaculate condition, all checks passed, marked as great price on AutoTrader when I first enquired. 
  • born_again
    born_again Posts: 13,552
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    I can view my credit file with Experian using MSE' Credit Club. There are no public records (e.g., CCJs) linked to the account, no Cifas records, no late payments, and no defaults.

    You need to go direct to CIFAS with a SAR to find out what they hold on you. 
    Life in the slow lane
  • Okell said:
    pt6w said:
    ...The only two clauses that could feasibly be invoked are clauses pertaining to misrepresentation of my circumstances (in other words, lying on the application), or a material change in financial circumstances (e.g., bankruptcy or insolvency). [1] I'm confident that I provided an honest account of my circumstances at the application stage. [2] Even had I erred, knowingly or unknowingly, the provider had the opportunity to ascertain my financial circumstances at the stage at which it performed the hard search... 
    Please forgive me for saying so, but for some reason I find that choice of words a little unconvincing(?).

    [1]  I always tend to find a bit insincere someone who tells me that they've told me an "honest" answer rather than a truthful and/or accurate one.  Don't know why but only saying "honest" always strikes me as rather evasive and not necessarily the same as truthful and/or accurate.  If I know that if I hadn't misrepresented something I would clearly and unequivocally say so - ie I gave an accurate and truthful answer.

    But perhaps I'm being unfairly pedantic in that regard...

    [2]  If you had erred, knowingly or unknowingly, then I think they can terminate the contract.  It's irrelevant whether or not they could have checked what you told them if what you told them was not accurate - even if "honest".


    I don't know what to say to you. Where I come from, "honest" and "truthful" are synonymous terms. I was "truthful and accurate", if this helps. In order to confirm that I had in fact been "truthful and accurate", as you say, the lender would have to investigate (a hard credit check is the obvious means of doing so). My point was to indicate that it doesn't appear to have performed any subsequent checks and therefore, by implication, this probably isn't the the reason it is terminating the agreement. Thanks for your contribution.


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