Not upheld: irresponsible lending - inadequate affordability checks complaint against Moneybarn No.1 Ltd

Decision detail

Summary

Miss K complained that Moneybarn unfairly entered into a conditional sale agreement for a £5,000 car loan in July 2020, claiming the £249.29 monthly payments were unaffordable. Moneybarn had conducted an income and expenditure assessment and credit searches, finding no CCJs though recent defaults existed. The ombudsman found Moneybarn's checks were not proportionate given Miss K's credit difficulties and should have verified actual living expenses rather than assuming them. However, upon retrospective analysis of Miss K's bank statements, the ombudsman determined sufficient funds remained for sustainable repayment after accounting for committed expenses and existing credit commitments. The complaint was not upheld as more thorough checks would not have prevented the lending.

The Ombudsman's reasoning

The ombudsman found that while Moneybarn's checks were not proportionate given Miss K's credit history and should have included verification of actual living expenses, retrospective analysis of bank statements showed that even with proper checks, sufficient funds would have remained for sustainable repayment. The ombudsman noted Miss K's later submissions were made in support of a compensation claim and were less likely to reflect her true position at the time of application. The ombudsman also considered that Miss K did not correct the stated expenditure figure of £617 and that lending to someone receiving benefits is not inherently unreasonable.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website