Upheld: Irresponsible lending complaint against BMW Financial Services (GB) Limited trading as BMW Financial Services

Decision detail

Summary

Miss P complained that BMW FS irresponsibly lent to her by approving a hire purchase agreement for a car without completing adequate affordability checks. The agreement involved monthly repayments of £183.47 over 47 months with a total payable of £18,818.44. BMW FS relied on automated approval based on credit search results showing good credit history and low indebtedness, without verifying income or assessing essential expenditure. The ombudsman upheld the complaint, finding that proportionate checks would have shown Miss P's income was insufficient to sustainably meet the repayments alongside her existing commitments. BMW FS was ordered to refund overpayments with interest and remove adverse credit file information.

The Ombudsman's reasoning

The ombudsman found that whilst BMW FS had some positive information about Miss P (full-time employment, good credit history, low indebtedness), the checks completed were not reasonable and proportionate given her existing commitments and the terms of the agreement. The ombudsman determined that proportionate checks would have required verification of actual income and information about essential expenditure. Based on bank statement analysis, the ombudsman concluded that such checks would have revealed Miss P's income was insufficient to sustainably meet her existing commitments plus the new monthly repayments, leaving insufficient disposable income. The ombudsman rejected BMW FS's arguments that early settlement and account balances demonstrated affordability, as these did not address the fundamental issue that the agreement was unaffordable at the time of lending.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website