Not upheld: Irresponsible lending complaint against Moneybarn No.1 Limited

Decision detail

Summary

Mrs B complained that Moneybarn unfairly entered into a conditional sale agreement for a used car in August 2018, claiming inadequate affordability checks and unaffordable finance, and that undisclosed commission of £600 paid to the credit broker created an unfair relationship. The ombudsman found Moneybarn's initial checks were not proportionate given Mrs B's recent credit defaults and the agreement's substantial cost and term. However, when the ombudsman analysed Mrs B's own bank statements, there appeared to be sufficient funds remaining after committed expenses to sustain the £414.36 monthly payments. Regarding the commission, the £600 payment represented only 5.3% of the borrowed amount and did not involve a discretionary commission arrangement or commercial tie, falling below the threshold for unfairness established by the Supreme Court. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman acknowledged that Moneybarn's affordability checks were not proportionate given Mrs B's credit history and the agreement's cost and term. However, when recreating what proportionate checks would have shown using Mrs B's own bank statements, there appeared to be sufficient funds remaining after committed expenses to make the payments. The ombudsman declined to require bank statement analysis as standard practice for secured lending. Regarding commission, the £600 payment represented only 5.3% of the amount borrowed and 4.5% of total credit cost, did not involve a discretionary commission arrangement, and no commercial tie existed between the broker and lender, therefore falling short of the Supreme Court's threshold for unfairness.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website