Upheld: Irresponsible lending complaint against CA Auto Finance UK Ltd
Financial Ombudsman decision DRN-6462464 of 2026-06-30T00:00:00+00:00. Irresponsible lending complaint against CA Auto Finance UK Ltd. Outcome: Upheld.
Decision detail
| Reference | DRN-6462464 |
|---|---|
| Decision date | 2026-06-30T00:00:00+00:00 |
| Firm | CA Auto Finance UK Ltd |
| Product | Motor finance (PCP / HP) |
| Claim type | Irresponsible lending |
| Outcome | Upheld |
| Remedy | CAAF directed to: (1) Refund £4,821.18 to Mrs M; (2) Calculate and refund interest overpaid on this amount using the relevant interest rate for each agreement from 27 June 2022 until the end of each agreement (5.2% for Car One agreement period, 8.9% for Car Two agreement period, 10.9% for Car Three agreement period); (3) Remove any adverse information reported on the credit file for each agreement if applicable; (4) Pay £400 compensation; (5) Provide a detailed breakdown of interest calculations. |
Summary
Mrs M purchased a new car (Car One) in June 2022 with a £3,942.40 deposit via hire purchase with CAAF. Within days, the car developed faults and Mrs M requested an exchange within a month. The car was exchanged for a used car (Car Two) in July 2022, but the original deposit was not refunded or transferred to the new agreement, while negative equity of £878.78 was added, causing Mrs M to overpay on monthly payments. Mrs M later entered a third car finance agreement in February 2023. CAAF treated the exchange as a part-exchange rather than unwinding the original agreement, and rejected Mrs M's complaint in November 2024. The ombudsman upheld the complaint, finding that CAAF was responsible for the dealer's actions and should have unwound the agreement with a deposit refund. The ombudsman directed CAAF to refund the net loss of £4,821.18, calculate and refund overpaid interest across all three agreements at their applicable rates, remove adverse credit file information, and pay £400 compensation for distress caused during Mrs M's vulnerable period.
The Ombudsman's reasoning
The ombudsman found that Mrs M validly exercised her short-term right to reject Car One due to faults. The agreement should have been unwound with a refund of the deposit, rather than being treated as a part-exchange. By treating it as a part-exchange, the deposit was not carried forward to Car Two, but negative equity was included, causing Mrs M to overpay. CAAF is responsible for the dealer's actions under Section 56 of the Consumer Credit Act 1974. Insufficient information was provided to Mrs M about the implications of the part-exchange arrangement, constituting mis-selling. The ombudsman determined that the simplest fair remedy, given the complexity of recalculating three agreements, was to refund the net loss amount (£4,821.18) plus overpaid interest calculated at the applicable rates for each agreement, plus compensation for distress caused during a vulnerable period.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| CA Auto Finance UK Ltd, all decisions | 234 | 55% |
| Irresponsible lending, all decisions | 30,770 | 37% |
| Motor finance (PCP / HP), all decisions | 19,529 | 38% |
Source
Read the original decision on the Financial Ombudsman Service website