BMW FINANCIAL SERVICES (GB) LIMITED · DRN-5819549

The complaint Mr A complains about charges applied by BMW FINANCIAL SERVICES (GB) LIMITED trading as BMW Financial Services after he voluntarily terminated a hire purchase agreement. What happened In January 2023, Mr A was supplied with a used car through a hire purchase agreement with BMW. The cash price of the car was £33,495. He made an advance payment of £4,000 and the agreement was for £29,495 over 48 months; with 47 monthly payments of £526.80 and an optional final payment of £16,063.28. At the time of supply, the car was around five years old, and had travelled around 34,330 miles. The agreement set out that Mr A had an annual mileage allowance of 8,000. The agreement had a maximum total mileage of 66,330 and an excess mileage charge of 9.51p for each additional mile. The agreement outlined that if terminated early, the maximum total mileage would be reduced proportionately to reflect the actual period of use – which would be used to calculate any excess mileage charge. In February 2025, Mr A asked to end the agreement due to a change to his circumstances. The agreement set out that BMW was entitled to the return of the car and to half the total amount payable (£22,411.44) less any amounts already paid. Mr A paid an additional £5,241.44 to terminate the agreement. BMW arranged for the car to be collected and inspected. It wrote to Mr A and said it was applying the following charges: • Alloy wheel LHF – corroded - £80 • Alloy wheel LHR – scratched - £80 • Alloy wheel RHR – scratched - £80 • Alloy wheel RHF – scratched - £80 • Front bumper – scratched - £45 • Door RHF – paint chips - £40 • Excess mileage – 7,233 miles at 9.51p per mile - £687.86 Mr A made a complaint. He said he had no choice but to terminate the agreement for reasons beyond his control, and felt the charges created an unfair situation in BMW’s favour. He said the charges had caused him financial difficulty and affected his mental health – as he had to take out a loan elsewhere to finance them. He said that – given the overall amount he was being asked to pay – BMW should consider waiving some of the charges. BMW didn’t agree it had made an error. It said the agreement clearly set out that Mr A needed to have paid half the total amount payable to terminate it early. It was satisfied the excess mileage charge was applied in line with the agreement terms, and the damage it had applied charges for went beyond fair wear and tear as set out in the British Vehicle Rental and Leasing Association (BVRLA) guidelines.

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The complaint was referred to this service. One of our Investigators considered the complaint. They were satisfied the voluntary termination and excess mileage charges had been applied correctly in line with the terms of the agreement and the Consumer Credit Act 1974 (CCA). They also thought the agreement was clear about how the charges would be applied in the event of early termination. In summary, they said: • S99 of the CCA sets out the right for a consumer to terminate a hire purchase agreement early, and S100 sets out their liabilities when doing so. • In brief, on termination a consumer is liable to pay at least half of the ‘total price’ of the agreement. ‘Total price’ is defined by S189 of the CCA as the total sum payable under the hire purchase agreement. It doesn’t include charges for items that are payable as compensation for breach of an agreement. This means that any charges for breaches of the agreement are in addition to any liability for termination. • S99 sets out that any liabilities that the consumer accrued prior to termination aren’t to be affected by the termination. • The agreement sets out that the excess mileage charges accrue with each mile covered in excess of the mileage allowance. The terms were clear that the charges accrued before termination and therefore not affected by the termination. • The terms of the agreement don’t set out that exceeding the mileage allowance is a breach of the agreement, so the charges are therefore included in the total price of the agreement. • So, the mileage charges accrued prior to termination and counted towards the total price of the agreement. Mr A’s accrued liability under S100 therefore included the charges. • The credit agreement set out the details of the excess mileage charges clearly, and were clear that they would be payable on voluntary termination of the agreement if the pro-rated mileage allowance had been exceeded. • When considering the agreement as a whole, they were satisfied it was clear that the charges would be applied in addition to the voluntary termination charges. They were satisfied it was fair and reasonable for BMW to apply the charge. They also considered the damage charges. They were satisfied some of these charges were for damage that went beyond fair wear and tear and were applied fairly in line with the BVRLA guidelines. But they didn’t think the charges for the alloy wheel damage were applied fairly – as there was evidence to suggest the damage was present at the point of supply. They recommended BMW remove these charges (totaling £320) as well as any adverse information on Mr A’s credit file relating to them. BMW accepted the Investigator’s recommendations, but Mr A didn’t. In summary, he said he accepted the excess mileage charge and thanked our Investigator for recommending that some of the damage charges be removed - but was unhappy with the amount he was asked to pay to terminate the agreement. He felt there was a significant concern regarding the consumer protections offered under the CCA and felt his individual circumstances had been exploited. He said he’d already paid a significant amount towards the agreement before it was terminated, and it was unfair to charge more than £6,000 on top of that. He felt BMW had unfairly profited from the situation and said there should be protections in place for customers who have to end an agreement for reasons beyond their control. Our Investigator wasn’t persuaded to change their view, so the complaint has been passed to me to decide.

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In his submissions to this service, Mr A has referred to charges applied to two separate agreements taken at different times. Under this complaint I’ve only considered Mr A’s agreement with BMW which started in January 2023. Mr A’s other agreement will be addressed separately. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. If I haven’t commented on any specific point, it’s because I don’t believe it’s affected what I think is the right outcome. Where evidence has been incomplete or contradictory, I’ve reached my decision on the balance of probabilities – what I think is more likely than not to have happened given the available evidence and wider circumstances. In considering this complaint I’ve had regard to the relevant law and regulations; any regulator’s rules, guidance and standards, codes of practice, and (if appropriate) what I consider was good industry practice at the time. Mr A was supplied with a car under a hire purchase agreement. This is a regulated consumer credit agreement which means I can consider a complaint about it. Mr A told our Investigator he now accepts the excess mileage charge – so I won’t comment on this charge in detail. I’ve considered the remaining charges in turn. Voluntary termination I’ve first considered whether BMW acted fairly by requiring Mr A to pay an additional amount when he said he wanted to end the agreement early. Mr A says, in summary, that the amount charged was excessive and exploitative – and that BMW is effectively profiting from his circumstances. Sections 99 and 100 of the CCA set out a consumer’s rights and liabilities when terminating a finance agreement early. Section 99 states: “99 Right to terminate hire-purchase etc. agreements. (1) At any time before the final payment by the debtor under a regulated hire-purchase or regulated conditional sale agreement falls due, the debtor shall be entitled to terminate the agreement by giving notice to any person entitled or authorised to receive the sums payable under the agreement.” Section 100 states: “100 Liability of debtor on termination of hire-purchase etc. agreement. (1)Where a regulated hire-purchase or regulated conditional sale agreement is terminated under section 99 the debtor shall be liable, unless the agreement provides for a smaller payment, or does not provide for any payment, to pay to the creditor the amount (if any) by which one-half of the total price exceeds the aggregate of the sums paid and the sums due in respect of the total price immediately before the termination.” This means borrowers can voluntarily return a car and end an agreement before its reached its term – but if they do the business will be entitled to half the total sum payable under the agreement. If that amount hasn’t been paid already, the business can ask the customer to pay the remaining amount required. This is also set out in Mr A’s agreement. In this case, Mr A had already made payments totalling around £17,170 towards the

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agreement when he asked to terminate it. The total amount payable if the agreement had run to its full term was £44,822.88. Because Mr A terminated the agreement early, BMW was entitled to the return of the car and half of this amount. So, I’m satisfied BMW acted fairly by asking Mr A to pay a further £5,241.44, as this brought the amount paid by Mr A to half of his total liability. I understand Mr A’s concern that the rules don’t account for situations such as his where a customer might unexpectedly need to end an agreement early. But the above provisions are set out to allow customers to end an agreement early if they’re don’t want to – or can’t – continue with it. To be clear, these rules are outlined in the CCA – and aren’t something I can change or disregard. Mr A says the payments disproportionately favour BMW – as they have the benefit of these funds as well as the value of the car itself. He also notes the significant amount he’d already paid towards the agreement before terminating it. But BMW entered the agreement on the basis that Mr A would continue to make payments through its full term – and either make an optional final payment or return the car at the end of the agreement. The total amount it would’ve received had the agreement run its course is substantially more than what BMW has asked Mr A to pay. I’m sorry to hear about the impact this has had on Mr A – and I don’t doubt that he didn’t intend to terminate the agreement early when he entered it. But I’m satisfied the amount requested by BMW is in line with the terms of the agreement and the provisions set out in the CCA. While I understand the agreement was terminated early due to circumstances outside of Mr A’s control, I see no reason to conclude that BMW could not request the amount outlined in the agreement. Damage charges Under the terms of the agreement, Mr A was responsible for any damage beyond fair wear and tear when he returned the car. The BVRLA sets industry guidance on what is considered fair wear and tear – which I’ve considered. This guidance is generally intended for new cars that have been returned at the end of their first finance agreement – so is mainly used to assess damage to cars that are a few years old. In this case, the car was around five years old at the point of supply – and the inspection took place around two years after that. Taking this into account I’m satisfied the BVRLA guidance is relevant – but I’ve taken the age and mileage of the car into account when deciding whether damage goes beyond fair wear and tear. Alloy wheels Our Investigator already set out why they didn’t think BMW had fairly applied charges for the four alloy wheels – and BMW doesn’t dispute this. For completeness, I agree with our Investigator that these charges weren’t applied fairly. I say this because Mr A has provided evidence that he raised a concern about the condition of all four alloy wheels soon after the car was supplied. Although his comments related only to alloy caps, I think there’s enough to say the alloys were damaged to at least some extent. So, I can’t conclude how much – if any – of the damage BMW charged for occurred while the car was in Mr A’s possession. So, I don’t think BMW has demonstrated these charges were applied fairly. These charges come to a total of £320 – which BMW has now agreed to remove. Front bumper The report includes a photo showing a series of small scratches across an area of the front

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bumper, and a patch of paintwork that appears to have been stripped. While the length of each scratch isn’t clear, based on the measuring tool at least one appears more than 25mm – and there are significantly more than four scratches in total. So, I’m satisfied this damage goes beyond fair wear and tear. Door RHF The BVRLA guidance allows for a maximum of six chips along each door edge. The photo BMW has provided is slightly unclear – but at least seven chips are visible. So, I’m satisfied this damage goes beyond fair wear and tear. With the exception of the alloy wheels – I’m satisfied the charges applied by BMW represent damage that goes beyond fair wear and tear, taking the age and mileage of the car into consideration. So, I’m satisfied those charges were applied fairly and remain payable. Summary I appreciate this will come as a disappointment to Mr A, but for the reasons I’ve explained I don’t find BMW has made an error or treated him unfairly when applying charges after the agreement was terminated – with the exception of the alloy wheel damage charges, which I understand have yet to be paid. So, BMW should remove those charges. Mr A has also mentioned the way in which the charges are impacting his credit file – which is causing further financial strain. This wasn’t part of the complaint Mr A referred to BMW or this service – so I won’t comment on it in detail here. However, as a general principle lenders are required to report true and accurate information to credit reference agencies – including late payments. As I’m requiring BMW to remove the alloy wheel charges, it should also amend Mr A’s credit file so that those charges aren’t reflected. As I’ve found the other charges were applied fairly, I don’t require BMW to remove any adverse information in relation to them. My final decision My final decision is that I uphold Mr A’s complaint. I require BMW FINANCIAL SERVICES (GB) LIMITED trading as BMW Financial Services to: • Remove the alloy wheel damage charges totaling £320; and • Amend Mr A’s credit file so that the above charges aren’t included in any adverse reporting or arrears balance. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr A to accept or reject my decision before 3 April 2026. Stephen Billings Ombudsman

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