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I have mentioned in the past the great asset a credit card can be when dealing with consumer rights issues such as faulty goods. Provided the goods cost between £101 and £30,000 and you pay even a token amount on a credit card you are covered for the full value of the goods.

In addition the dealer (supplier) and the credit card company are jointly liable under section 75 of the Consumer Credit Act. So let’s take as an example a car that costs £15,000 for which you either have cash or you have taken out a personal loan. Either way when you buy the car it is seen as a cash purchase. However, when you saw the car at the dealership, whilst you arranged for the cash to be available you made a nominal payment of £50 on your credit card in order to hold the car.

That is sufficient for you to be covered up to the total value of the car of £15,000. I have read of instances whereby a dealer, in a bad way, has taken holding deposits from customers on credit cards. The dealer has then received the balance in cash but before the car is delivered he goes bust. On the face of it the customer has lost his cash but by making the deposit payment on a credit card he can now claim back the full amount paid of £15,000.

When this has been explained to people both myself and lawyers get asked similar questions, here are a few with answers:

If you buy several things on a credit card coming to over £100 are you covered by section 75? No, you are only covered for individual items costing over £100 each. Buy 4 tickets to a show costing £50 each in one transaction that don’t arrive – you aren’t covered.

If an item costs from £100 to £30,000 I’m covered by section 75. No, the goods must cost OVER £100, exactly £100 is not covered.

Will you still be covered by section 75 even if you pay the amount of the deposit or the cost of the item off? Yes

If you exceed your credit card limit in order to pay the deposit or the cost of the goods are you still covered? Yes you are.

Do you have to wait till the seller or dealer refuses to give you a refund before approaching the credit card company? No, both are liable so you can approach both for a refund.

When making a claim to the credit card provider are you limited to the amount paid on the credit card? As mentioned above, no, if the dealer/supplier can be proven to be at fault both parties are liable for the total cost.

This is a common one which causes confusion as it goes to the definition of a consumer. If a self employed person uses a credit card to buy a vehicle for business use they won’t be covered by section 75. This is false because whilst the Consumer Rights Act would not see a self employed person as a consumer the self employed person would be considered to be a ‘consumer’ within the Sale of Goods Act which is still in force.

Many businesses offer the ability to pay by credit card or through Paypal. If you pay by credit card through Paypal are you still covered by section 75? This is true. But Paypal offers its own protection which can occasionally work better than section 75 but you no longer have access to the FOS.

If you pay a deposit on a credit card with the balance on HP will you still be covered by section 75? Many people would believe that you are covered and you still have access to the FOS but the fact is that you aren’t covered by section 75 as the HP agreement supersedes the credit card payment. It will only cover a 3 party arrangement, in this case there are 4.

Items costing more than £30,000 are not covered by section 75. This isn’t strictly true as there is a section 75A which imposes a secondary liability on the creditor increasing the limit to £62,620 but the joint responsibility no longer applies.

Hope all that helps.  By Graham Hill

After a spate of adverts on the TV in which various lenders suggest that they can carry out a search to see if you are eligible for a loan, without leaving what is known as a ‘footprint’ on your credit file, many questions have been asked by customers and those on my blog regarding theses searches and their own credit files. In general they want to know how this can be done, are our searches recorded and what is the purpose of having searches registered on your credit file if some lenders are apparently ignoring the rules?

OK let me explain. First of all the rules are very clear, if you make an application to a lender for credit, which will cause a lender to access the information held on your credit file, they will register the search with the agency. More on this later. However, the rate you are charged for finance is often based on your credit status so to help the industry and avoid you suffering as a result of ‘shopping around’ a new search was introduced known as a ‘quotation search’.

This is different to a credit application search, known simply as a Credit Search. All Credit Searches are available to anyone who has access to your file after you have given them permission. But only you can see the ‘quotation searches’, none of these searches are available to lenders or anyone else accessing your credit information such as potential employers, association membership applications etc. Each of the three UK credit reference agencies, Equifax, Experian and Call Credit will list all ‘credit searches’ on your credit file once you have made an application for credit.

However, this encouragement to ‘shop around’ is promoted in the knowledge that whilst attempting to get to the best rate through lenders or brokers, your credit score won’t be penalised. That seems reasonable. However, lenders and credit card companies are using this loophole to drum up business. Now don’t misunderstand me, I’m not actually opposed to some form of pre qualification as it can save a lot of pain. If you are pre-qualified on the finance you will know, before you get excited over the new car you’ve chosen, if you will be offered the finance to acquire the car and the car salesman won’t waste time showing you cars that you can’t finance.

But it’s the abuse of the system that I, and many others, object to. There are some lenders and search agents that will offer to carry out a free credit search for you to see how your credit stacks up and your likelihood of receiving the loan you are thinking of applying for. But having carried out the search you are then inundated with offers of  ‘Pre-approved’ loans and credit cards. Not, in my opinion, in the spirit of the FCA regulations to treat customers fairly etc.

Anyway, let’s get back to the recorded searches and their affect on your credit. Different lenders have different attitudes towards the searches. If you have a number of credit searches on your file within a very short period of time, i.e. several over a few days they will approach your application with caution as it could be that you are applying for credit to many funders at the same time that could take you out of your affordability range.

Of course several searches could be the result of several applications being made around the same time. As the approval doesn’t get registered on your file, only the loan when you draw down the amount borrowed or, in the case of HP, when you take delivery of the car, the only way that lenders are aware of each other is via the searches. So whilst imperfect they can act as a warning.

For example, let’s say you have had agreed 5 different loans from different lenders, you could arrange draw down on the same day and only after that would each lender be aware of the other, so that’s why searches are important. To avoid the lender believing that you could be doing this make sure that if you are ‘playing the field’, when you ask for a quote the lender is only carrying out a quotation search. You should also be aware that when searches are registered they are only registered with the agency that the lender uses. In other words there is no sharing of information between credit reference agencies, so if the lender searches Experian the search will only be registered with them, not with Equifax or Call Credit.

Of course some of the larger lenders will search all three platforms, especially if the loan amount is substantial. When checking your own files, there are new agencies such as CheckMyFile who purport to check all the platforms for information on you but I’m unsure about the accuracy but in the meantime, because of the way the systems work you may find information on one platform about you that doesn’t appear on another. This is what one of the agencies said to me:

However, please know that the information held by xxxxxxxxx is dependent on what is shared with us by lenders. Not all lenders share account information with all credit referencing agencies, and so it’s possible that we may not hold any information at all about a particular account. This is why we recommend that you check your credit report with all three major credit referencing agencies, in order that you can get a complete view of the information held on you.

So much for the adverts on TV enticing you to check your credit score with them. If you are just going to check one it might be useful to know that 76% of lenders use Experian, 54% use Equifax and 30% use Call Credit. Why doesn’t this add up to 100%? Because some lenders search 2 or all three platforms. The Moneysavingexpert has helped out by listing the various lenders and which credit reference agencies they use. So if you are applying for say a credit card with the Co-op you will see that they only check Experian so that’s the one you need to check out. Here’s the link:

http://www.moneysavingexpert.com/credit-cards/credit-reference

There are no legal obligations applied to searches and the amount of time they should remain on your file but for information credit searches remain on your Experian and Eqifax files for 12 months whilst they remain on Call Credit for 2 years.

Oh and as a couple of final thoughts, firstly if you are looking to take out a loan, thanks to the EU Consumer Credit Directive of 2010 those advertising representative APR’S must be seen to provide 51% of all customers with the rate advertised. This changed from 66% under our own UK legislation so the EU has provided banks and other lenders a licence to print money. And to prove my point, in an advert on Barclay’s Bank website they advertise a personal loan of between £7,500 and £15,000 at an APR of 4.9% Representative over 2 – 5 years. It also says rates may differ with a tiny 3 attached to it. This is what tiny 3 says right at the bottom of the page:

3. The rate you’re offered may differ from the representative APR shown – and will be based on your personal circumstances, the loan amount and the repayment term. The Barclayloan advertised here is available over terms of between 2 to 5 years, with a maximum APR of 26.9%.

Wow, bit of a difference eh! And as they only need to provide the 4.9% APR rate to just 51% of the customers how many of the other 49% do you think are having to pay closer to 26.9% than the 4.9%? Hmmm!!

Secondly, and finally, there is confusion over your ability to obtain finance and your credit score. Having many credit searches on your file will, in many cases, drop your credit score slightly. So your score may drop from say 99 out of 100 to say 95. In some cases I’m told that your credit score won’t be affected at all but this doesn’t mean you can finance a new Ferrari on a take home pay of £2,000 per month.

And this is where the more important score comes into play, the underwriters ‘Score Card’. This score takes into account many other things such as where you live, what company you work for and the industry you’re in, how long you’ve been in your current job, number of dependents and of course your income along with many other factors, put together by each individual lender.

It is this scorecard that determines whether you will be advanced the money or not, not your credit score which is just part of the equation. By all means make sure that you look after your credit and maintain a high credit score but remember that a high credit score doesn’t mean auto accept on anything you want to finance.

Absolutely finally if you find that you have applied for credit at several dealerships over a few days then changed your mind, or applied online, not for a ‘quote’ but actually for the finance to several lenders, leaving a string of Credit Searches on your credit files, make sure that you explain what happened on each of the 3 credit agency files by posting a ‘Notice of Correction’.

Explain that you have been test driving cars and each time was talked into checking if you could be cleared on finance by their lender or if you have been applying for finance online and again not realised that search footprints, left behind, might affect your credit score, post a note to this affect. If you do this it forces an underwriter to check your file rather than rely upon the autoscore to either accept or reject your final application.

In fact the same applies if you have some negative activity on your file (defaults, arrears) as a result of say a marriage breakup or redundancy, you have 200 words to explain what happened and that you are now on top of things (if you are). It could certainly help your application if the problems took place some time ago, Just thought I would mention!

By Graham Hill

Did I mention that I won the Innovation of the Year Award at the Frontline Solutions sponsored Finance & Insurance Awards 2015? Well in case I didn’t mention it – I did! And very proud of it I am too. Earlier in the day at the conference, speakers spoke about the motor finance industry and the need for much more education, not just for those selling the finance products such as dealers, brokers, banks, building societies and others but also customers who stand no chance if the people selling the products don’t have a grasp of the way the finance functions.

Thinking of a change but unsure as to the best way to finance your car? Then you need a copy of my car finance book, Car Finance – A Simple Guide by Graham Hill. Click on the link below to buy the best car finance book on the market, available as a Kindle Book and Paper Back.

To add to the confusion salesmen, anxious to make a sale, end up emphasising benefits that often don’t exist and certainly avoid telling clients anything that may put them off. For example a bank won’t tell you that an unsecured personal loan puts you at greater risk than a secured personal loan.

If you don’t repay your £2,000 loan that is secured against your house and you end up in court it would be very extreme for the judge to throw you and your family out on the street and order the sale of your house with maybe north of £100,000 equity in it for the sake of a £2,000 debt.

On the other hand if the £2,000 was ‘unsecured’ a court order could be issued and you could end up handing over valued possessions such as your TV, computer, jewellery etc. I always say that unsecured means unsecured against nothing in particular. So whilst explaining the finance they kind of miss that bit out albeit that it may be in the small print.

Oh and it doesn’t stop there, they could still go for your house if you don’t have enough value in your possessions in order to pay the debt, known as a charging order. This will force you to pay the debt back if and when you sell your house which is basically what happens when you take out a secured loan that you cannot repay. And that is the tip of the iceberg.

Many retail car salesemen don’t understand how contract hire (better known as a lease) works. But neither do customers and even accountants often miss some of the massive advantages attached to car leasing. At the other extreme there are customers whom, having taken a car on a lease, suddenly become as expert as me! They simply tout around the market to find the cheapest deal but will it end up being the cheapest with so many opportunities to charge all sorts of ‘extras’ included in the contract?

The rates are often not fixed so between ordering the car and delivery you may find that the rates have increased by £30 per month as a result of a £1,000 increase in cost of the vehicle. There are also some ‘brokers’ who are not conforming to the new FCA rules, are not members of any trade association and possibly don’t have professional Indemnity Insurance or are just managing to survive and could be closed down before your car even gets delivered.

How will you deal with that situation? If he is shut down or goes bust what happens to the car you have on order? If the car was ordered by the broker the order will be cancelled and you could be back to square 1. See what I mean? There is more to education than just understanding the basic products.

That’s why I am in the midst of re-writing my best selling book, Car Finance – A Simple Guide and creating educational videos to make sure you understand the upsides, downsides and matters relating to vehicle finance. Watch this space for future announcements and products. By Graham Hill

I recently answered a frequent question in one of my standard mailouts which received a massive response so I am reprinting it on my blog for you to come back to if needed. Part 2 will be a further blog when sent out to my database, here is part 1:

Following on from my last piece it seems that 1 in 6 applications for finance were rejected last year according to statistics revealed by OceanFinance.co.uk. It will be interesting to see how this compares to 2014 following the introduction of the new Financial Conduct Authority (FCA) rules in April of this year.

Thinking of a change but unsure as to the best way to finance your car? Then you need a copy of my car finance book, Car Finance – A Simple Guide by Graham Hill. Click on the link below to buy the best car finance book on the market, available as a Kindle Book and Paper Back.

They found that more than a third of the adult population (38.6%) applied for finance of some form or another over the last 12 months. This was an increase from 2013 when 33% applied for one or more of the popular credit products. Men are more likely to apply than women by quite a margin, 43.6% vs 34.4% over the last 12 months.

The age group most likely to apply for credit are 25 – 34 at 60.6% whilst only 17% of the over 55’s applied for credit according to the stats. The most likely decline would be if you apply for an overdraft at nearly one in five declines (18.6%). 16% of those applying for a personal loan get declined.

The good news for applicants last year, not so sure the same will apply this year, is that car finance applications were most successful with just 11% being rejected. Applications for a first mortgage was the type of  finance that lenders liked the most as they were most likely to be accepted, no doubt helped along by the Government incentives reducing the risk. 84.5% of all applications were accepted over the last 12 months.

The type of lender most likely to lend to applicants are what are known as ‘crowd lenders’ or ‘peer to peer lenders’ with an acceptance rate of 86%. It was also found that rather than operate a straight accept or decline process applicants were offered a higher rate of interest if they were felt to be higher risk, particularly when applying for credit cards.

I fear that this will all change dramatically over the coming year – for the worse! By Graham Hill

Most people are aware that in order to be approved for finance you need to have a reasonably good credit score. You maintain a good credit score, as you know, by making credit payments on time (pay by direct debit wherever possible), not gaining CCJ’s, defaulting or going into arrears and not applying for credit to too many companies at the same time.

Thinking of a change but unsure as to the best way to finance your car? Then you need a copy of my car finance book, Car Finance – A Simple Guide by Graham Hill. Click on the link below to buy the best car finance book on the market, available as a Kindle Book and Paper Back.

Closing down old credit cards can also help. But I have had a few ‘declines’ just recently because of financial associations that, in a few cases, were no longer in existance. When you apply for credit you can only have your personal details searched so if you have a partner who has very poor credit or could even be bankrupt, they cannot be checked out unless you give permission or you have a financial association.

If you are shown to have a financial association with anyone the chances are that their credit status will also be taken into account. So if you are applying for finance and you and your partner have a joint mortgage or a joint credit card there is a financial association. One client had a girlfriend and they jointly applied for a credit card and were approved at the time.

They didn’t take out the card and split up shortly afterwards but one of them ran into some severe financial difficulties. As the financial association was still showing on the credit reference agency file the unknowing boyfriend was declined for car finance because of the difficulties experienced by the ex girlfriend.

So check your credit reference files and if you are showing any financial associations with any ex’s make sure you write to the credit reference agencies (all 3) and tell them that you no longer have any financial association with your ex, and to remove the link. By Graham Hill

Related articles

• ‘Ex-husband’s debts barred me from a mortgage’ (telegraph.co.uk)

Call me old fashioned but I still find it amazing how easily individuals part with their personal details to companies they know nothing about. I write about this time and again and still people are dopey enough to part with every piece of information a crook needs to open a bank account in your name or take out a credit card.

Thinking of a change but unsure as to the best way to finance your car? Then you need a copy of my car finance book, Car Finance – A Simple Guide by Graham Hill. Click on the link below to buy the best car finance book on the market, available as a Kindle Book and Paper Back.

If I wanted details from a number of high net worth individuals I would offer a great car deal on say a BMW X5 or M3, either car for say £299 + VAT per month. Absolutely impossible to get to those figures. I would then set up a dummy web site and wait for the enquiries to flood in.

I would have a very believable person answering the phone explaining how the boss has committed to a number of cars in order to achieve the very low rates on offer, all we need to do is take a finance application from them and away we go.

I would ask for some proofs such as a copy of a driving licence and passport along with a few bills and for good measure a copy of the front and back of a credit card. Oh and by the way last 3 months bank statements wouldn’t go amiss when applying for credit!

It would be that simple as people are greedy, they want everything on the cheap and that is what the crooks rely upon. Oh and by the way the scenario I described isn’t far fetched, it actually happened!

This leads me to the latest figures released by fraud prevention service, CIFAS. In the first 5 months of this year nearly 60,000 people were victims of identity fraud. There were more than 46,000 cases of impersonation over the period where fraudsters used individual identities to open new accounts.

They also showed that more than 13,500 were victims of ‘takeover’ when an existing account is broken into and hijacked. Around 96,000 confirmed frauds were reported to CIFAS in the first 5 months of this year.

By the way the identity theft I referred to earlier was on BMW X5’s, the same company carried out the same fraud when advertising Vauxhall Astras at well under the market rate, so you don’t have to be a high net worth individual.

Related articles

• European Study Reveals ID Fraud To Be Rife In UK (misco.co.uk)

Back in July 2009 I posted the following on my blog, under the heading of  ‘If you have guaranteed a debt you may be able to avoid payment’. I’ve repeated the blog below as I believe it is worth showing again, given the current economic climate but also I have uncovered something else that may be a little worrying if you have guaranteed a debt and the Read more »

The credit system in the UK is in need of a really good shake up. Credit decisions seem to be made based on some very iffy information and totally illogical. Take two people doing similar jobs, earning the same amount of money who both apply for credit on similar cars. The first client has a perfect, unblemished record. He has a mortgage and a couple of Read more »

Image via CrunchBase

Many of you know of the so called money saving expert, Martin Lewis who has clearly saved many people lots of money on credit card overcharges and bank charges. I never deny that, but he has also been the source of miss-information. Take his personal criticism of  Carol Vorderman when she advertised consolidation loans on TV and Read more »