Not upheld: irresponsible lending - inadequate affordability checks complaint against MI Vehicle Finance Limited

Decision detail

Summary

Miss M complained that MI Vehicle Finance Limited lent irresponsibly by failing to undertake reasonable affordability checks before providing a PCP agreement for a £22,950 car with £319.73 monthly repayments. MI relied on a credit check showing Miss M earned £50,097 annually with manageable existing debt and no payday lending. The ombudsman found MI's checks were not proportionate to the lending amount and should have included income verification and investigation of essential expenditure. However, the complaint was not upheld because analysis of Miss M's actual financial position showed she would have had approximately £737 monthly disposable income after all commitments, making the lending sustainably affordable had proper checks been conducted.

The Ombudsman's reasoning

The ombudsman found that while MI failed to complete proportionate affordability checks by not verifying income or investigating essential expenditure, the complaint could not be upheld because had MI conducted such checks, they would have discovered Miss M had sufficient disposable income (approximately £737 monthly) to sustainably afford the repayments. The ombudsman applied the test of whether proportionate checks would have shown the lending was sustainable, rather than whether the firm's actual checks were adequate.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website