Upheld: breach of contract; unfair administration of refinancing; failure to honour agreed lending commitment complaint against Mercedes-Benz Financial Services UK Limited
Financial Ombudsman decision DRN-6346810 of 2026-05-13T00:00:00+00:00. breach of contract; unfair administration of refinancing; failure to honour agreed lending commitment complaint against Mercedes-Benz Financial Services UK Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-6346810 |
|---|---|
| Decision date | 2026-05-13T00:00:00+00:00 |
| Firm | Mercedes-Benz Financial Services UK Limited |
| Product | car finance (Personal Contract Purchase - PCP) |
| Claim type | breach of contract; unfair administration of refinancing; failure to honour agreed lending commitment |
| Outcome | Upheld |
| Remedy | MBFS must pay Miss R £449.74 for increased lending costs (the difference between the alternative loan cost of £8,827.10 and the original MBFS refinancing agreement cost of £8,377.36), conditional on Miss R settling the balance owed on the earlier finance contract. MBFS must also pay Miss R £500 for distress and inconvenience caused, which is not conditional on repayment of the earlier finance agreement. |
Summary
Miss R complained that MBFS unfairly required her to undergo additional affordability checks after already approving and agreeing to a refinancing contract for the final payment on her PCP agreement. In May 2025, MBFS approved her application and she signed the refinancing agreement, but in July 2025 MBFS informed her it needed to perform additional checks due to regulatory changes. The ombudsman found that a binding contract had been formed and MBFS breached it by failing to release the funds and requiring additional checks. Although MBFS's lending process had changed, it was unfair to retroactively apply new requirements to an already-agreed contract. The ombudsman upheld the complaint and ordered MBFS to compensate Miss R £449.74 for increased borrowing costs from alternative financing and £500 for distress and inconvenience.
The Ombudsman's reasoning
The ombudsman found that a binding contract was formed in May 2025 when MBFS approved Miss R's application and she signed the agreement. Although MBFS's lending process changed in July 2025 to implement more stringent affordability checks in line with FCA guidance, it was not fair to retroactively apply these new requirements to an already-agreed contract. A loan agreement is a legally binding agreement to perform certain actions, and MBFS's failure to release the funds constituted a breach of contract. The ombudsman rejected MBFS's argument that the agreement was not finalised because funds had not been released, as this misunderstands the nature of contracts. While the ombudsman acknowledged that some time had passed and it may not be straightforward to restart the old contract, MBFS should compensate Miss R for any increased borrowing costs resulting from having to obtain alternative financing, plus compensation for distress and inconvenience.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Mercedes-Benz Financial Services UK Limited, all decisions | 1,150 | 34% |
Source
Read the original decision on the Financial Ombudsman Service website