Marsh Finance Ltd · DRN-3968972

The complaint Miss H complains that Marsh Finance Ltd irresponsibly approved a hire purchase agreement that she couldn’t afford. What happened In October 2016 Miss H took out a hire purchase agreement with Marsh to finance the purchase of a used car. The agreement was for £11,465 over five years, with monthly repayments of £188 over 59 months and a final monthly payment of £198. Miss H said she could never afford the agreement. She said she had a lot of doorstep and payday loans at the time she entered into the agreement. She said the car dealer told her to give false figures so that she’d get the finance. Marsh said they’d reviewed Miss H’s credit file and pay slips at the time of the application. They said they’d calculated that Miss H’s monthly net pay at the time was approximately £1,130. They said that at the time they considered the lending to be affordable if the monthly payment was less than 21% of the net income. They calculated 21% to be £237, and because the monthly payments were £188, they said the lending was affordable. They said they hadn’t relied on the information supplied via the dealer when making the assessment. They said they’d relied on the information obtained from Miss H’s credit file and her pay statements when deciding the lending was affordable. Miss H said the pay statement she’d supplied, and that Marsh had relied on, was for a seasonal job from March to October each year. She said this pay statement included overtime that she didn’t always get, and holiday pay as it was her final pay for that season. Unhappy with Marsh’s response, Miss H brought her complaint to this service. Our investigator looked into the complaint. He felt that the checks Marsh did to assess whether or not the agreement was affordable were not sufficient. He said Marsh should’ve found out more about Miss H’s actual expenditure. He said that if they had carried out reasonable and proportionate checks they would most likely have found that the repayment was affordable. He based this on the information obtained from Miss H’s bank statements from the time of application and her credit report. He said that Miss H has stated that she had a number of doorstep loans and payday loans in place at the time. Our investigator said that these weren’t visible on the bank statements and weren’t recorded on the credit file. And because Miss H hadn’t declared them he couldn’t say that Marsh had done anything wrong by agreeing to provide the finance. He was also satisfied that Marsh had acted fairly because it had confirmed with Miss H in writing and in a telephone call that she understood the terms of the agreement and that it was affordable.

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Miss H disagreed, and the matter has been passed to me for a final decision. 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. Having done so, I have reached the same overall conclusions as the investigator, and for broadly the same reasons. If I haven’t commented on any specific point, it’s because I don’t believe it’s affected what I think is the right outcome. In considering this complaint I’ve had regard to the relevant law and regulations; any regulator’s rules, guidance and standards, codes of practice, and what I consider was good industry practice at the time. Miss H was supplied with a car under a hire purchase agreement. This is a regulated consumer credit agreement which means we’re able to look into complaints about it. The Financial Conduct Authority (FCA) was the regulator when Marsh lent to Miss H. It required Marsh to lend responsibly. Its rules and guidance are found in its Consumer Credit Sourcebook (CONC), available online. The rules required them to take reasonable and proportionate steps to assess whether or not a borrower could afford to meet loan repayments in a sustainable manner over the lifetime of the agreement. The rules don’t set out what Marsh needed to do to carry out an appropriate assessment or how such an assessment was to be carried out in practice. What’s proportionate would depend on a number of factors including the type of product, the amount of credit being considered, the associated cost and risk to the borrower relative to the borrower’s financial situation – amongst other factors. The rules require their checks to be borrower-focussed. It’s not an assessment of the risk to Marsh of them not getting their money back: it’s the risk to the borrower, in this case Miss H of getting into financial difficulty as a result of the decision to lend. When considering Miss H’s complaint, I have considered the following questions:  did Marsh complete reasonable and proportionate checks when assessing Miss H’s application to satisfy itself that she would be able to repay the agreement in a sustainable way?  if not, what would reasonable and proportionate checks have shown? Reasonable and proportionate checks Marsh said that they considered a credit report, a recent pay statement provided by Miss H, and a bank statement. Having reviewed this information, they said they made a decision to lend as it showed that Miss H had sufficient disposable income. But I’d have expected them to consider Miss H’s outgoings. I say this because she was making a significant commitment. She was entering into a five year agreement, requiring her to pay £188 every month. I also note that the credit report showed two active loans – but there was nothing to show how much her payments on these loans were.

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I think Marsh should have sought further information about the impact of these existing financial commitments on Miss H’s disposable income, and her living costs, to confirm whether or not she could have taken on this financial commitment, for a five year period. So I’m not satisfied that Marsh carried out a proportionate affordability check. Would reasonable and proportionate checks have shown that Miss H would have been able to sustainably repay the agreement? I can’t say what information and evidence Marsh would have asked for or received had they carried out a reasonable and proportionate affordability assessment. However, as I have said above, I do think they should have asked Miss H more about her expenditure. So I’ve considered what I think they would likely have discovered had they done so. Miss H has provided us with bank statements from 2016. This gives me a brief summary of her income and her committed monthly expenditure, and provides the type of information that Marsh would likely have discovered had they carried out reasonable and proportionate checks. The statement shows income from Miss H’s employer. This matches the information Marsh used when they considered her application. The statements also show outgoings to two lenders – these are for £30 and £10 per month. So, based on this information, I think it would have been reasonable for Marsh to make the decision to lend to Miss H. The statements don’t show any living expenses. Miss H told Marsh she was living with her parents, so it would have been reasonable for them to accept this was the case. The bank statements don’t show any payments towards rent or a mortgage. They do show irregular payments to what looks like her parents. But they are irregular, so I wouldn’t have expected Marsh to deduct living costs from the disposable income. The statements do not show any payments to any other lenders. Miss H said that she had loans with several doorstep lenders. These are also not listed on the credit report that Marsh obtained. Miss H said she paid the lenders in cash and that’s why they don’t appear on her bank statements. I think if Marsh had asked for further information such as bank statements this would not have changed their lending decision as the loans Miss H has told us about would not have been visible to them. And as part of the lending process they asked Miss H to confirm her circumstances, including whether or not the lending was affordable. This was done on a form, and also in a telephone call. I think it would have been reasonable to expect Miss H to declare the existence of the other loans to Marsh at this time, if not before. And if she had, they could have reviewed the lending decision. For a number of reasons, including the passage of time, Miss H has been unable to provide information about the existence and costs of these loans. So I’m unable to say what impact they would have had on Marsh’s lending decision. I’ve not seen any reason why Marsh ought to have been aware of the existence of these loans, or that Miss H was at that time reliant on doorstep lending. So I think it was reasonable for them to conclude that the lending was affordable.

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Did Marsh act unfairly or unreasonably in some other way? Miss H also tells us that her employment was seasonal, and this affected her income. But as before, she didn’t tell Marsh this was the case. So it’s not reasonable to expect them to have taken that into account. Miss H said that the dealer told her to provide false information in order to have the finance approved. I can’t comment on that – but it appears to me that Marsh fairly relied on information provided by Miss H, and where possible verified by bank statements and a credit report, so I’m satisfied the dealers encouragement didn’t affect the decision to lend. So for the reasons I’ve set out above, I’m satisfied that had Marsh completed reasonable and proportionate affordability checks, it’s likely they would still have concluded the agreement was affordable. So I don’t think they need to do anything to put things right. My final decision For the reasons I’ve explained above, I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss H to accept or reject my decision before 12 May 2023. Gordon Ramsay Ombudsman

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