Rejecting finance agreement for mis-sold goods

Rejecting a finance agreement on the basis of mis-selling

This is a common situation and you have several potential routes depending on the type of finance, who did the selling, and what exactly was misrepresented or omitted.

Legal position:

Consumer Credit Act 1974, section 75:
If you used a credit agreement (including hire purchase or a fixed-sum loan) to finance goods or services costing between £100 and £30,000, the creditor is jointly and severally liable with the supplier for any misrepresentation or breach of contract by the supplier. This means you can bring a claim directly against the finance provider for the mis-selling, even if the supplier has disappeared or gone insolvent.

Section 56 of the Consumer Credit Act 1974:
Where a dealer or intermediary conducted antecedent negotiations (for example, a car dealer arranging finance on the spot), those negotiations are deemed to have been conducted by the dealer as agent of the creditor. Anything the dealer said or promised to induce you to enter the agreement can be attributed to the finance company.

Consumer Rights Act 2015:
Goods must be of satisfactory quality, fit for purpose, and as described. Services must be performed with reasonable care and skill. If what was sold to you did not match what was described or promised, that is a potential breach of contract giving rise to a right to reject (within the short-term right to reject period of 30 days for goods, or a right to repeat performance or a price reduction for services).

Misrepresentation Act 1967:
If you were induced to enter the contract by a false statement of fact (whether made innocently, negligently, or fraudulently), you may be entitled to rescind the contract entirely and recover what you have paid.

FCA regulated agreements:
If the finance agreement is regulated by the Financial Conduct Authority (for example, a personal loan, hire purchase, or conditional sale agreement from a regulated firm), the firm must comply with the FCA's rules on treating customers fairly, clear and not misleading communications, and suitability. Breach of these rules can support a complaint and a claim.

What "rejection" means in practice:

1. If you are within the short-term right to reject (30 days for goods under the Consumer Rights Act 2015), you can reject the goods and treat the contract as at an end. The finance company must then unwind the agreement and refund you.

2. If you are outside the 30-day window, you still have rights. You can request a repair or replacement, and if that fails or is not offered within a reasonable time, you have a final right to reject or to a price reduction. For mis-selling specifically (as opposed to a quality issue), your route is more likely misrepresentation or breach of contract rather than the staged remedies for faulty goods.

3. For misrepresentation, the remedy is rescission of the contract. This puts the parties back in the position they were in before the contract was made. You return the goods (or cease using the service), the finance company writes off or refunds the balance, and you recover any sums already paid.

Practical steps:

1. Gather your evidence. What were you told (in writing, in adverts, verbally)? What was the reality? Were there documents, emails, brochures, or text messages that show what was promised?

2. Write a clear complaint to the finance provider (not just the dealer or supplier). Set out what you were told, why it was false or misleading, and what remedy you are seeking (rescission of the agreement, return of the goods, refund of sums paid). Cite section 75 and/or section 56 of the Consumer Credit Act 1974 if applicable, and misrepresentation if a false statement was made.

3. Give the finance provider eight weeks to respond. If they reject your complaint or do not respond, you can escalate to the Financial Ombudsman Service (FOS), which can make binding awards up to £430,000 for complaints about acts or omissions on or after 1 April 2024 (£415,000 for complaints referred before that date about acts on or after 1 April 2019). The FOS route is free and less stressful than court.

4. If the FOS route is not available or does not resolve matters, you can bring a county court claim for rescission and/or damages. For claims up to £10,000 the small claims track applies, which limits cost exposure.

Important caveats:

The right to rescind for misrepresentation can be lost (or "barred") if you affirm the contract after discovering the truth, if restitution is no longer possible (for example, you have substantially altered the goods), or if too much time has passed. Act promptly once you become aware of the mis-selling.

If the goods were sold on hire purchase or conditional sale, the finance company owns the goods until you complete all payments, which can actually strengthen your position because you are rejecting goods that belong to them.

The distinction between a mere "sales puff" and an actionable misrepresentation matters. A statement like "this is the best car on the market" is puff. A statement like "this car has a full service history and has never been in an accident" when it has is a clear misrepresentation.

If you can tell me more about the type of goods or service, the type of finance, what was said to you, and when this happened, I can give you a more targeted answer on your specific position and best next step.