Partially upheld: contract termination, outstanding balance following insurance shortfall, credit file reporting complaint against Mercedes-Benz Financial Services (UK) Limited

Decision detail

Summary

Mr A complained that MBFS demanded payment of a shortfall on his Hire Purchase Agreement after his car was involved in a no-fault accident and insurance did not cover the full balance. MBFS had also terminated the agreement and taken possession of the car because Mr A was using it as a taxi and it was incorrectly insured, both breaching the agreement terms. The ombudsman found MBFS was entitled to terminate due to these breaches, but upheld Mr A's complaint regarding the shortfall process. MBFS must sell the car, offset salvage proceeds against the balance, provide Mr A with a final bill, and allow one month to settle or arrange repayment, with credit file protections during this period.

The Ombudsman's reasoning

MBFS had clear contractual grounds to end the agreement as Mr A breached two explicit terms: using the car as a taxi and failing to maintain correct insurance. While Mr A claimed he disclosed taxi use at point of sale, this was unlikely given the agreement terms and Mr A bore responsibility to check the terms. However, it was unfair to demand payment of an unknown shortfall before the car was sold. The fair approach was for MBFS to sell the car, offset salvage proceeds, and provide Mr A with a final balance figure and reasonable time to pay, with credit file protections during this period.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website