Upheld: irresponsible lending - inadequate affordability checks complaint against MI Vehicle Finance Limited

Decision detail

Summary

Mr S complained that MI Vehicle Finance Limited irresponsibly provided a hire purchase agreement for a car in August 2024 with monthly repayments of £423.81 against his net monthly income of £1,853. MI conducted only basic affordability checks, obtaining income information and noting modest existing credit balances, but failed to examine Mr S's expenditure. The ombudsman found that Mr S was spending close to his income before the new finance repayments and therefore could not sustainably repay the credit. The complaint was upheld, and MI was ordered to end the agreement, collect the car with no further payments due, and remove adverse credit file information.

The Ombudsman's reasoning

MI Vehicle Finance failed to conduct reasonable and proportionate affordability checks before lending. Although MI obtained basic income information, it did not examine Mr S's expenditure despite the hire purchase repayments being relatively high compared to his income. The Investigator's calculations, which MI did not dispute, demonstrated that Mr S was spending close to his income before the new finance repayments and therefore could not sustainably repay the credit. Had MI conducted proportionate checks, it would have discovered this and should not have approved the lending.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website