Not upheld: irresponsible lending / unaffordable lending complaint against Moneybarn No.1 Ltd

Decision detail

Summary

Miss R complained that Moneybarn unfairly entered into a conditional sale agreement for a used car in November 2022, claiming the £467.65 monthly payments were unaffordable as she was already using her overdraft. Moneybarn had conducted an income and expenditure assessment, cross-checking Miss R's income against bank deposits and finding no adverse credit history, and concluded she had sufficient funds after deducting estimated living expenses and existing commitments. The ombudsman found that while Moneybarn should have obtained actual rather than assumed living expense information given the agreement's 60-month term and £12,691.35 in charges, retrospective analysis of Miss R's bank statements showed she had sufficient funds to make sustainable repayments at the time of lending. The complaint was not upheld as more thorough checks would not have prevented the lender from proceeding, and Miss R's later difficulties stemmed from unexpected car repairs.

The Ombudsman's reasoning

The ombudsman acknowledged that Moneybarn's checks were not proportionate given the term and total cost of the agreement, as the lender should have ascertained Miss R's actual living costs rather than assuming them. However, when the ombudsman retrospectively reviewed Miss R's bank statements, they showed sufficient funds remained after committed expenses to sustainably make the repayments at the time of lending. The ombudsman concluded that even with more thorough checks, Moneybarn would likely have proceeded with the lending, as Miss R would not have voluntarily disclosed unaffordability when seeking to persuade the lender to approve the application. The ombudsman also rejected the argument that overdraft usage alone should prevent lending.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website