CarCashPoint Limited · DRN-2980053

The complaint Mrs S has complained that CarCashPoint Limited lent to her irresponsibly. What happened Mrs S was given two logbook loans by CarCashPoint in 2018 and 2019. The loans were secured against a vehicle that she owned. Loan 1 in June 2018 was for around £2,560 and due to be repaid in 60 monthly instalments of around £221. The total amount to be repaid including interest was just over £13,312. Loan 2 in September 2019 was for around £4,896 and was due to be repaid in 60 monthly instalments of around £424. The total amount to be repaid including interest was just over £25,459. Mrs S used the second loan to settle Loan 1 and took an amount in cash. One of our adjudicators looked into the complaint. He didn’t think CarCashPoint should have provided Mrs S with either loan and he asked the lender to put things right. CarCashPoint didn’t agree with the adjudicator’s assessment. As the complaint hasn’t been settled, it has been passed to me to resolve the matter. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. We’ve set out our approach to considering unaffordable and irresponsible lending complaints on our website - including the key relevant rules, guidance, good industry practice and law. And I’ve considered this approach when deciding Mrs S’s complaint. I think there are overarching questions I need to consider in order to decide what’s fair and reasonable in the circumstances of this particular complaint:  Did CarCashPoint complete reasonable and proportionate checks to satisfy itself that Mrs S would be able to repay her loans in a sustainable way? If so, did it make a fair lending decision each time? If not, what would reasonable and proportionate checks have shown at the time?  Did CarCashPoint act unfairly or unreasonably in some other way? CarCashPoint needed to take reasonable steps to ensure that it didn't lend to Mrs S irresponsibly. This means that it should have carried out proportionate checks to satisfy itself that she could repay the loans in a sustainable way. The lender was required to carry out a borrower focussed assessment each time - sometimes referred to as an “affordability assessment” or “affordability check”. The checks had to be “borrower” focussed – so CarCashPoint had to think about whether repaying the loans sustainably would cause any difficulties or adverse consequences for Mrs S. In other words, it wasn’t enough for CarCashPoint to simply think about the likelihood of it

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getting its money back, it had to consider the impact of loan repayments on Mrs S. Checks also had to be “proportionate” to the specific circumstances of each loan application. In general, what constitutes a proportionate affordability check will be dependent upon a number of factors including – but not limited to – the particular circumstances of the consumer, such as their financial history, current situation and outlook, and any indications of vulnerability or financial difficulty and the amount / type / cost of credit they are seeking. In light of this, I think that a reasonable and proportionate check ought generally to have been more thorough:  the lower a customer’s income (reflecting that it could be more difficult to make any loan repayments to a given loan amount from a lower level of income);  the higher the amount due to be repaid (reflecting that it could be more difficult to meet a higher repayment from a particular level of income); and  the longer the term of the loan (reflecting the fact that the total cost of the credit is likely to be greater and the customer is required to make payments for an extended period) and  the greater the number and frequency of loans, and the longer the period of time during which a customer has been given loans (reflecting the risk that repeated refinancing may signal that the borrowing had become, or was becoming, unsustainable). I’ve carefully considered all the evidence, arguments and information I’ve seen about this matter and what it means for Mrs S. CarCashPoint says it asked Mrs S for information about her income and expenditure, but it wasn’t its usual practice to carry out formal credit checks at the time. The lender thinks that the both the loans were affordable for Mrs S. Loan 1 I would have expected CarCashPoint to want to gather enough information for it to have a thorough understanding of Mrs S’s financial position, to ensure that she could repay her loan sustainably over an extended period. Given that the lender didn’t carry out a formal credit check, I think it would have been proportionate for CarCashPoint to have taken steps to independently verify Mrs S’s circumstances, and to check her regular monthly expenditure - for example by requesting bank statements - rather than rely largely on information that Mrs S was providing about her expenditure. And from what I’ve seen, CarCashPoint did review Mrs S’s bank statements from a joint account she held with her husband. But I don’t think that CarCashPoint’s checks went far enough or that it made a fair lending decision on this occasion and I will explain why. CarCashPoint was providing Mrs S with an expensive loan, repayable over an extended period. I think that when CarCashPoint reviewed Mrs S’s joint bank account statements it would have become aware that Mrs S’s finances were showing signs of financial distress: the account was fairly consistently overdrawn; in March the account only went into credit due to other high cost lending; there were unplanned fees and bank charges and opening and closing balances that remained overdrawn; expenditure shown on the account regularly seemed to exceed income and there appears to be other high cost lending and credit being taken, beyond what Mrs S had declared. I think CarCashPoint ought reasonably to have

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realised that Mrs S’s income might not be sufficient to support the large number of credit repayments showing on the joint account. CarCashpoint referred to Mrs S’s husband’s income in its Final Response which suggests that the lender was taking his income into account. But this was sole lending to Mrs S, so CarCashPoint was required to establish whether Mrs S had sufficient disposable income to meet her loan repayments, without relying on her husband’s income. As I’ve already explained, CarCashPoint was required to establish whether Mrs S could sustainably make her loan repayments. On balance, I think CarCashPoint ought reasonably to have recognised from the information it gathered that Mrs S may be having some difficulty managing her financial situation. And so it would have been reasonable and proportionate to have looked at Mrs S’s wider financial circumstances by carrying out further checks. Mrs S has provided bank statements from her sole bank account at the time which show a number of other high cost loans. I think reasonable and proportionate checks by CarCashPoint would have uncovered more about Mrs S’s true financial position and the lender would most likely have discovered that she was borrowing from several other high cost lenders and she had other creditors. CarCashPoint says Mrs S had sufficient disposable income to afford the monthly repayments. But I think CarCashPoint focussed its calculation of whether loan 1 was affordable for Mrs S on a pounds and pence basis. And as I’ve already explained, the lender was required to establish whether the borrower could sustainably meet the loan repayments – not just whether the loan payments were technically affordable on a strict pounds and pence calculation. The loan payments being ‘affordable’ on this basis might be an indication a consumer could sustainably make their repayments. But it doesn't automatically follow this is the case. This is because the relevant regulations define sustainable as being without undue difficulties and in particular the customer should be able to make repayments on time, while meeting other reasonable commitments; as well as without having to borrow to meet the repayments. And it follows that a lender should realise, or it ought fairly and reasonably to realise, that a borrower won’t be able to make their repayments sustainably if they’re unlikely to be able to make their repayments without borrowing further. On balance, I think CarCashPoint ought reasonably to have realised that Mrs S was borrowing to keep up with her ongoing financial commitments and that it was most likely she would need to borrow elsewhere to repay her loan. I think the lender ought to have realised that given her financial circumstances, it was unlikely that Mrs S would be able to sustainably repay the loan over the extended term. So it ought reasonably to have declined to provide her with the first loan. Loan 2 Mrs S returned to borrow for a second time around 15 months into the 60 months term for loan 1. CarCashPoint’s customer contact notes indicate that Mrs S experienced some difficulties repaying her first loan, but it still lent to her for a second time. I understand that Mrs S used her second loan to settle loan 1 and she took the remainder in cash. On balance, I don’t think CarCashPoint made a fair lending decision when it provided Mrs S with the second loan. I think the information CarCashPoint gathered from the joint bank statements ought reasonably to have suggested that Mrs S was not making any headway into repaying her existing creditors and that she was most likely continuing to rely on an overdraft to meet her regular financial commitments as well potentially borrowing from other high cost and payday lenders. Mrs S was returning only just over a one year into a five-year

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loan term to borrow again – and her overall indebtedness to CarCashPoint was substantially increasing. Mrs S says she told CarCashpoint that she was in arrears on her mortgage payments. CarCashPoint disputes this. Overall, I can’t be sure exactly what was discussed at the time but I think CarCashPoint had sufficient information for it to be reasonably aware that Mrs S might be struggling financially when she applied for further lending and so it ought reasonably to have looked deeper into her financial circumstances. Had it done so, I think it would most likely have realised that it was unlikely that Mrs S would be able to repay the second loan sustainably. Taking everything into account, I think CarCashPoint ought reasonably to have realised that Mrs S was struggling financially and that she would most likely be unable to sustainably repay the further lending over the extended loan term. I think in the circumstances CarCashPoint ought reasonably and fairly to have concluded that it wouldn’t be appropriate to provide Mrs S with the second loan. I haven’t seen anything which makes me think that CarCashPoint treated Mrs S unfairly in any other way. But I don’t think it should have provided the loan to her. So CarCashPoint needs to put things right. Putting things right I think it’s fair and reasonable for Mrs S to repay the principal amount that she borrowed, because she had the benefit of that lending. But she has paid interest and charges on loans that shouldn’t have been provided to her. I think Mrs S has lost out and CarCashPoint should put things right for her. If CarCashPoint sold any outstanding debt payable in respect of Mrs S’s loans, it should buy it back from the third party, if it’s able to do so, and then take the following steps. If CarCashPoint isn’t able to buy any outstanding debt back then it should liaise with the new debt owner to achieve the results outlined below. CarCashPoint should:  Remove all interest, fees and charges from both loans and treat all the payments Mrs S made as payments towards the capital.  If reworking Mrs S’s loan account results in her having effectively made payments above the original capital borrowed, then CarCashPoint should refund these overpayments with 8% simple interest calculated on the overpayments, from the date the overpayments would have arisen, to the date the complaint is settled*.  If reworking the account leaves an amount of capital still to be paid, then CarCashPoint should try to agree an affordable repayment plan with Mrs S, bearing in mind its obligation to treat her positively and sympathetically in these discussions.  CarCashPoint might have already returned the logbook to Mrs S, but if it has not done this, it should cancel the bills of sale and return the V5 document to her once any outstanding capital has been repaid.  Remove any adverse information recorded on Mrs S’s credit file in relation to the loans. *HM Revenue & Customs requires CarCashPoint to deduct tax from this interest. CarCashPoint should give Mrs S a certificate showing how much tax it’s deducted if she

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asks for one. My final decision My final decision is that I uphold Mrs S’s complaint and direct CarCashPoint Limited to put things right as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs S to accept or reject my decision before 24 January 2022. Sharon Parr Ombudsman

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