“We Financed It By Mistake” — The Latest GAP Complaint Excuse, And Why It’s Not Going To Fly

There’s a new contender in the GAP complaints Hall of Fame, and it’s a beauty.

Step forward Volkswagen Financial Services (trading as Skoda Financial Services), with a response which is essentially this:
“Yes, the GAP policy ended up on the finance agreement… but that was an error. Here’s the interest we earned back. And as for everything else, complain to the dealership.”

If you’re wondering whether that’s a genuine misunderstanding of responsibility, or a tactical attempt to exhaust consumers into giving up… join the queue.

The “clerical error” that somehow became a credit agreement

In its response to our complaint the lender acknowledges the GAP policy was financed, calls that financing “in error”, and offers a refund of the interest on the financed amount.

Then comes the getaway car: “We don’t sell/arrange/underwrite GAP, so we can’t investigate how it was sold, that’s for the dealer.”

But you do finance it, and benefit from doing so.

This isn’t just weak. It’s internally contradictory, and it isn’t a one off… it’s becoming a regular excuse.

Because once you’ve financed a product inside a regulated credit agreement, you are part of the transaction.

That’s the whole point of being the lender.

The lender tries to sound noble: “I have no intention of ‘passing the buck’…” …right before attempting to direct the complaint to the dealership as the party who will “address” the concerns.

“We financed it in error” is not a defence, it’s a confession

Let’s translate “we financed it in error” into plain English:

• Your controls are so poor you didn’t know what you were lending for, or
• You knew exactly what you were lending for, but you’d now like that to become “an error”, because it’s inconvenient.

Neither is a good look, and neither can be relied upon.

If a lender is paying a dealership based on an invoice, then the idea that optional extras and add-ons can just drift into the funded amount like a plastic bag in the wind raises obvious questions about record-keeping and governance.

So when we say this smells like either poor competence or tactical denial, we’re not being dramatic. We’re reading what’s in front of us.

It does appear that the lender has considered which is the worst option, and has concluded that having no controls over what it finances is better than being responsible for the sale of the GAP product.

An interesting choice to make.

Financing the GAP policy drags the whole mess into consumer credit territory

If the GAP cost is on the credit agreement / financed as part of the loan, the lender is contractually linked to it, and that matters because the Consumer Credit Act gives the court power to intervene where the relationship arising out of the agreement (or a related agreement) is unfair.

Section 140A is designed to let the court look at the whole relationship (terms, conduct, disclosures, commission, and what was (or wasn’t) done before the agreement was made).

Also worth remembering: section 56 of the Consumer Credit Act defines “antecedent negotiations” and treats pre-agreement negotiations by brokers/suppliers as part of the credit transaction framework.

So the idea that a lender can wash its hands because “the dealership said the words” is, at best, very optimistic.

The “refund the interest” trick: small cheque, big distraction

The lender’s move here is textbook:

• Admit a narrow point (“we financed it in error”).
• Pay a tiny sum (“here’s the interest”).
• Deny the real complaint (“we can’t investigate sale / suitability / fair value / chain commission disclosure”).
• Pray that the complaint will go away.

But the consumer’s resolution request wasn’t “please return the lender’s profit on the financed amount”. The issues raised include (among other things) suitability, evidence of understanding and acceptance, fair value, and chain commission transparency.

Refunding the interest attributed to the GAP product doesn’t answer any of that. It’s like setting fire to someone’s kitchen and then offering to replace the tea towel.

This is either ignorance, or strategy, and neither is acceptable

At this point, lenders have had more than enough time to learn a very simple concept:

If your name is on the credit agreement, and you financed the add-on, you don’t get to play “mere spectator”.

Some firms appear to be hoping that:

• consumers won’t understand the difference between sale responsibility and credit responsibility,
• they’ll be too busy to push back,
• and they’ll accept the “go complain to the dealer” diversion as the end of the road.

Forwarding a complaint isn’t a magic wand.

If the lender has responsibility by way of financing a product, it must investigate and respond properly. It cannot outsource that duty to a dealership as a convenient escape route.

And if a lender is effectively admitting it didn’t properly check what it financed, that’s not “remediation”. That’s a red flag.

They won’t make these claims go away. They’ll just keep trying different excuses. And we’ll keep calling them out.

Poor complaint handling and the FCA asleep at the wheel

Lenders have a long proven history of failing to handle complaints in accordance with their regulatory obligations, but it is examples such as this which results in consumers becoming reliant upon professional representatives.

The Financial Conduct Authority (FCA) is regularly found asleep at the wheel, and it is no surprise that it is currently playing catch up (again), with respect to products such as GAP.

It is almost always professional representatives that shine a light on scandals, much to the embarrassment of the FCA.

And the FCA doesn’t appear to take kindly to being embarrassed (although it should be used to it), so it targets representation rather than the firms that cause the scandal in the first instance.

GAP mis-selling is becoming the latest scandal, whether the FCA like it or not.