Not upheld: irresponsible lending - inadequate affordability checks complaint against Volkswagen Financial Services UK Limited

Decision detail

Summary

Ms L complained that VWFS unfairly entered into a hire-purchase agreement for a £22,763 vehicle in July 2020, arguing the agreement was unaffordable. VWFS conducted an income and expenditure assessment and credit searches but did not independently verify Ms L's income. The ombudsman found VWFS's checks were not fully proportionate but, applying retrospective analysis using bank statements, determined that proportionate checks would likely have shown Ms L could afford the £293.18 monthly repayments. Ms L's actual conduct in making timely payments and settling the agreement early in December 2022 supported this conclusion. The complaint was not upheld as the ombudsman was not persuaded that VWFS would have declined to lend had it conducted more thorough checks.

The Ombudsman's reasoning

While VWFS's checks were not fully proportionate as income was not independently verified, the ombudsman applied a retrospective analysis using available bank statements to determine what proportionate checks would likely have revealed. The bank statements showed sufficient funds remained after committed expenses and existing credit commitments to sustain the monthly repayments. Additionally, Ms L's actual conduct in making timely payments and settling early supported affordability. The ombudsman noted that Ms L would have been unlikely to volunteer unaffordability information when seeking credit, and that VWFS was not required to request bank statements. Therefore, it was unlikely that more thorough checks would have led VWFS to decline the lending.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website