Upheld: irresponsible lending - inadequate affordability checks complaint against BMW Financial Services (GB) Limited trading as ALPHERA Financial Services

Decision detail

Summary

Mrs C complained that Alphera lent to her irresponsibly when she entered into a hire purchase agreement in August 2021 for a car with monthly repayments of £700.64. Alphera relied on application information, a credit check showing no financial difficulties, and Mrs C's history of five well-maintained previous agreements. The ombudsman found Alphera's checks inadequate as they failed to verify income or obtain details of essential expenditure including rent, bills, and existing credit commitments. Analysis of available bank statements showed Mrs C had relatively low income and was relying on redundancy savings to meet her obligations. The ombudsman upheld the complaint, finding the lending was unaffordable and unsustainable, and ordered Alphera to refund all payments exceeding the original cash price of £56,990 plus 8% simple interest.

The Ombudsman's reasoning

The ombudsman found that Alphera's checks were not reasonable and proportionate because it failed to obtain and verify Mrs C's income or obtain information about her essential expenditure. Analysis of bank statements available at the time would have shown Mrs C had relatively low income and was relying on savings to meet commitments. The monthly repayments of £700.64 represented a very significant proportion of her net monthly income, making the lending unaffordable and unsustainable. The fact that Mrs C managed to meet payments initially was explained by her use of redundancy savings, which was not a sustainable source of income. The ombudsman rejected Alphera's arguments that the absence of missed payments or high credit utilisation indicated affordability, as these could be explained by Mrs C's depletion of savings.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website