Upheld: irresponsible lending and unaffordable credit complaint against MotoNovo Finance Limited

Decision detail

Summary

Miss S complained that MotoNovo irresponsibly lent her £20,547.89 for a car over 60 months at 8.9% APR based on an unverified income declaration of £21,142. MotoNovo conducted only a credit reference search and relied on Miss S's signed declaration of affordability, without verifying income or assessing essential expenditure. The ombudsman found that reasonable and proportionate checks would have revealed the lending was unaffordable, as Miss S's income exceeded essential expenditure by only £525 monthly, insufficient after the £422 payment for day-to-day expenses. The complaint was upheld and MotoNovo was ordered to end the agreement, refund overpayments with interest, and remove adverse credit file information.

The Ombudsman's reasoning

MotoNovo failed to conduct reasonable and proportionate affordability checks as required by CONC. While they obtained credit reference information showing Miss S was managing existing credit well, they did not verify her income or assess her non-discretionary expenditure. Given the substantial credit amount (£20,547.89) relative to declared income (£21,142) and the 60-month term, verification was necessary. Bank statements show that after the £422 monthly payment, Miss S would have had insufficient disposable income for day-to-day expenses and emergencies, making the lending unaffordable. The signed declaration was insufficient to obviate the need for proper checks.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website