Not upheld: irresponsible lending and unfair contract terms/excessive fees complaint against CA AUTO FINANCE UK LTD

Decision detail

Summary

Mr D complained that CA Auto irresponsibly lent to him by failing to conduct reasonable affordability checks and charged excessive late payment fees on a hire purchase agreement for a used car entered into on 20 February 2022 with monthly repayments of £192.76. Mr D argued that proper checks would have revealed his zero-hours and term-time only income, ongoing HMRC repayments of £438.95 per month, mental health disorder, and that he was pressured into the purchase when he could not afford existing debts. The ombudsman reviewed bank statements from the three months before lending and concluded that proportionate checks would have shown Mr D had sufficient income to meet the repayments and existing commitments, with disposable income remaining. The credit search showed no missed payments or signs of financial difficulty, and his previous car finance had higher repayments. The ombudsman found the late payment fees were clearly explained and not excessive, and rejected claims of unfair treatment or unfair relationship under Section 140A. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman reviewed the information CA Auto was likely to have obtained through open banking, credit searches, and the application form. Although CA Auto could not provide the actual open banking data seen, the ombudsman reviewed bank statements from the three-month period before lending to determine what would likely have been discovered. Considering Mr D's gross income of £36,636, his non-discretionary expenditure (excluding rent paid by ex-partner), HMRC repayments, and existing credit commitments, the ombudsman concluded that proportionate checks would have shown Mr D had sufficient income to meet the new monthly repayments of £192.76 with disposable income remaining. The credit search showed no signs of financial difficulty, no missed payments, and no recent increase in borrowing. The previous car finance agreement had higher repayments, demonstrating Mr D could afford the lower new repayments. The ombudsman found no evidence that CA Auto ought to have realised lending would be irresponsible.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website