In a move branded as unfair, Hitachi Capital Vehicle Solutions has announced it will not process applications for vehicle financing from individuals working in the hospitality sector.
The decision, announced by Hitachi to its brokers and dealers this week, comes on the eve the UK going into Covid-19 lockdown on 5 November for a month and will include the mandated closure of hospitality businesses across the country.
The sector has been one of the worst affected by Covid-19, with SMEs losing an average of 54% of their monthly business income, according to a May 2020 survey by Aldermore.
Citing consumer protection as the rationale behind its decision, Hitachi said the move was unrelated to the Government’s announcement of a second national lockdown.
In a statement, the vehicle leasing provider said the decision was made “in order to protect individuals in this sector from being potentially declined, and therefore putting customers in a situation that could impact their credit rating.”
Chris Tubbs, head of sales at Hitachi Capital Vehicle Solutions, said: “This decision was taken weeks ago, in the context of rising cases and the likelihood that certain parts of the economy were going to get hit again”
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The restrictions will only affect 2% of its applications. Given the small quantity, the firm opted for a “standard message,” said Tubbs.
He added: “We’re very transparent with our brokers, so that they can be as informed as they can with their own customers, and make sure they’re marrying the right finance providers to the right customer.
“The approval rate for the last couple of months has been very low. We’ve been doing it by a case-by-case basis since March, but it’s not easy to tell how some of these businesses have been affected by COVID-19. It has ended up causing more problems than it solves as we try to uncover how their business has been affected and whether it meets our lending criteria or not.”
Tubbs said the restrictions will be eased “as soon as we see that the affordability will be there”. Until then, the measures are “under constant review”.
However, the decision has come in for criticism for being discriminatory.
A broker at UK Car Finance, Jacob Carr, expressed surprise at the decision by Hitachi Capital Vehicle Solutions.
“Of all the finance companies that I deal with, and have dealt with in the past, I’ve never heard of this. Putting a blanket over a full industry is mental. They should still be treating it on a case-by-case basis. If you have an applicant that runs a successful chain of hotels and has a strong, stable income. Is he or she just declined?”
Referring to the finance companies that Carr partners with, he continued: “All of the finance companies that I work with do everything on a case-by-case basis. I don’t understand how a company can put a blanket ban on an industry?”
When asked whether other vehicle financing companies will follow Hitachi’s lead, Carr responded: “I don’t think other companies will follow suit. Finance companies are all about fairness in regards to their criteria. This is not fair.”
In an article for BBC Scotland, Tom Ponton, a bar owner in Edinburgh’s Grassmarket, expressed his frustration at the announcement: “It’s a disgrace and a scandal that they should find an excuse on the back of coronavirus to make it more difficult for the hospitality sector.”
Ponton continued: “It is not our fault that we have had all these restrictions imposed on us, and now we are being penalised further for the situation these restrictions have put us in.”
A spokesperson for UK Finance & Leasing Association recommended people shop around for finance, Ponton highlighted the subsequent damage this could have on individual credit ratings.
Hitachi Capital Vehicle Solutions is a trading style of Hitachi Capital (UK) Plc.