Not upheld: irresponsible lending - inadequate affordability checks complaint against BLUE MOTOR FINANCE LIMITED

Decision detail

Summary

Miss W complained that Blue Motor irresponsibly lent to her by failing to conduct appropriate affordability checks on a hire purchase agreement for a £7,290 car with total repayment of £11,521 over 59 months. Miss W had been employed for only three months at the time of application. Although the ombudsman found Blue Motor should have verified her actual income of approximately £1,950 per month using open banking data rather than credit reference agency information, it concluded that such verification would have shown consistent weekly income. Despite Miss W's overdraft usage and some returned direct debits, the ombudsman found these occurred before her employment began and were not indicative of her financial circumstances at application. The ombudsman determined Miss W had minimal essential living expenses and sufficient income to cover all essential expenditure, existing borrowing, and the new hire purchase repayments with a reasonable buffer, therefore the lending decision was fair and the complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that while Blue Motor should have verified income using open banking data rather than credit reference agency information, the bank statements showed Miss W received consistent weekly income of approximately £450. Although there were signs of potential financial distress (overdraft usage and returned direct debits), the returned direct debits occurred before Miss W's employment began and were not reflective of her circumstances at the time of application. The ombudsman concluded that Miss W's essential living expenses were minimal and she had sufficient income to cover essential expenditure, existing borrowing repayments, and the new hire purchase agreement with a reasonable buffer for emergencies. Overdraft usage alone does not indicate financial distress; what matters is whether the consumer is unable to clear the debt or is choosing to use it for everyday spending. The ombudsman was satisfied Miss W could afford to repay her overdrafts alongside all other outgoings.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website