Upheld: supply of goods not of satisfactory quality; irresponsible lending/credit management complaint against Blue Motor Finance Limited

Decision detail

Summary

Miss L complained to the FOS about Blue Motor Finance Limited's supply of a used car through a hire-purchase agreement that was not of satisfactory quality. The car developed issues shortly after purchase and could not be repaired. BMF initially rejected Miss L's complaint but later accepted that the vehicle was not of satisfactory quality. The key dispute concerned the appropriate remedy: Miss L claimed she should be compensated for losing her previous vehicle (which she part-exchanged for £10,700.00 but had to pay £1,800.86 additional to settle its finance), arguing her total loss was £12,500.86. The ombudsman upheld the complaint but rejected the full claim, finding Miss L did not own the part-exchanged vehicle (it was owned by her previous finance company). However, the ombudsman awarded £1,800.86 as fair compensation for the shortfall between the part-exchange value and the vehicle's market value, finding this loss was directly caused by BMF's failure to supply a satisfactory vehicle. BMF was directed to collect the car, end the agreement, refund all but one monthly payment plus interest, pay the £1,800.86 shortfall plus interest, remove adverse credit entries, and pay £300 distress compensation.

The Ombudsman's reasoning

The ombudsman accepted that the car was not of satisfactory quality (agreed by both parties) and focused on determining fair and reasonable remedies. The ombudsman rejected Miss L's claim for £12,500.86 relating to the part-exchanged vehicle because Miss L did not own that car—it was owned by her previous finance company. However, the ombudsman found it fair to award £1,800.86 (the shortfall Miss L paid to settle her previous finance) because the part-exchange value of £10,700.00 was significantly below the market value of approximately £12,577.00, and Miss L would not have agreed to this shortfall had BMF supplied a satisfactory vehicle. The ombudsman rejected claims for additional distress compensation beyond £300, finding that BMF's arrears correspondence was required by law and that Miss L's attempt to invoke section 90 CCA protection was invalid as she had not paid one-third of the purchase price. The ombudsman confirmed that complaint handling itself is not a compensable activity.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website