CarCashPoint Limited · DRN-2970216

The complaint Mr F complains that CarCashPoint Limited lent him a logbook loan when it shouldn’t have. What happened CarCashPoint lent Mr F one loan in September 2019, the loan was for £2,500 over a term of 36 months with a monthly repayment amount of £281.95. Mr F complained to CarCashPoint but it didn’t uphold his complaint and so he referred it to this service where it was looked at by one of our investigators. Our investigator thought that proportionate checks and reaction to the information CarCashPoint had would have made it aware that Mr F would struggle to repay the loan and so it shouldn’t have lent to him. CarCashPoint disagreed, it said its check went far enough and that its decision to lend was responsible. As the complaint hasn’t been resolved, it has been passed to me for a 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. We’ve set out our general approach to complaints about unaffordable/irresponsible lending - including all of the relevant rules, guidance and good industry practice - on our website. Having carefully thought about everything, I think that there are two overarching questions that I need to answer in order to fairly and reasonably decide Mr F’s complaint. These two questions are: 1. Did CarCashPoint complete reasonable and proportionate checks to satisfy itself that Mr F would be able to repay his loan without experiencing significant adverse consequences?  If so, did it make a fair lending decision?  If not, would those checks have shown that Mr F would’ve been able to do so? 2. Did CarCashPoint act unfairly or unreasonably in some other way? Did Carcashpoint complete reasonable and proportionate checks to satisfy itself that Mr F would be able to repay his loan without experiencing significant adverse consequences? The rules and regulations in place at the time of the loan required CarCashPoint to carry out a reasonable and proportionate assessment of Mr F’s ability to make the repayments under this agreement. This assessment is sometimes referred to as an “affordability assessment” or “affordability check”. The checks had to be “borrower” focused – so CarCashPoint had to think about whether repaying the loan would cause significant adverse consequences for Mr F. In practice this

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meant that CarCashPoint had to ensure that making the payments to the loan wouldn’t cause Mr F undue difficulty or adverse consequences. It wasn’t enough for CarCashPoint to simply think about the likelihood of it getting its money back, it had to consider the impact of the loan repayments on Mr F. Checks also had to be “proportionate” to the specific circumstances of the 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 (e.g. 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. Even for the same customer, a proportionate check could look different for different applications. In light of this, I think that a reasonable and proportionate check ought generally to have been more thorough:  the lower a consumer’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);  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 of the arguments, evidence and information provided in this context and what this all means for Mr F’s complaint. CarCashPoint has provided evidence to show that before lending this loan, it asked Mr F about his monthly income and expenses, it requested and saw bank statements of the previous three months, confirmed Mr F’s identity and checked that he wasn’t in an individual voluntary arrangement (IVA). The results of the checks CarCashPoint carried out provided some concerns that I don’t think it appropriately reacted to. Mr F said he was consolidating the borrowing on his credit card, he also said that he had a charge on his home which he was repaying. I think it should have been clear to CarCashPoint that Mr F had other credit elsewhere and it should have been looking to verify his level of indebtedness, it could have done this through a credit search. I’m not suggesting that CarCashPoint was required to carry out a credit search before lending, but it needed to show that it took appropriate steps to assess the affordability and sustainability of the loan while reacting to the information it already had. I don’t think it did this here. Mr F has provided a copy of his credit file and I can see that around the time CarCashPoint lent to him, he had some historic defaults from 2015 showing on his credit file and Mr F was in arrangements to repay those creditors. Looking at the bank statements CarCashPoint obtained at the time, I think it also should have been aware that Mr F would struggle to repay the loan. Mr F told CarCashPoint that he was self-employed, and I can see that over the relevant period, his income varied. There was other credit scoming into his account, but Mr F has said those credit payments were for his partner and I can see that he was transferring roughly the same amounts on those specific credit payments out of his account. So I think it is likely that it wasn’t his income.

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And so, in the three months before this loan, Mr F’s average income was around £1,173 and his living expenses on average over the period was around £1,014, this included things like his mobile phone, insurance, utilities and food. I think even without taking its checks further CarCashPoint should have known that Mr F would struggle to repay this loan as he didn’t have sufficient funds. This was borne out by the fact Mr F started having difficulties repaying the loan shortly after borrowing it. In the circumstances CarCashPoint shouldn’t have lent to Mr F and it needs to put things right. Did Carcashpoint act unfairly or unreasonably in some other way? I’ve considered whether CarCashPoint acted unfairly in some other way towards Mr F. I can see that Mr F has had difficulties repaying his loan and CarCashPoint set up an interim repayment plan for two months, which came to an end in February 2020. Following the end of this arrangement, CarCashPoint issued a default notice. It seems to me that Mr F had kept up to date with the payments on his arrangement and even though the arrangement had come to an end, I don’t think a default notice was the positive next step for CarCashPoint take. So, I’d remind CarCashPoint of his obligation under the rules that apply to it to show forbearance to Mr F in his financial difficulties. Putting things right – what CarCashPoint needs to do.  Remove all interest, fees and charges applied to the loan.  Treat any payments made by Mr F as payments towards the capital amount of the loan.  If Mr F has paid more than the capital then any overpayments should be refunded with 8%* simple interest from the date they were paid to the date of settlement,  But if there’s still an outstanding balance, CarCashPoint should agree a reasonable repayment plan with Mr F.  Remove any adverse information about the loan from Mr F’s credit file. † HM Revenue & Customs requires CarCashPoint to take off tax from this interest. CarCashPoint must give Mr F a certificate showing how much tax it’s taken off if he asks for one. My final decision For the reasons given above, I uphold Mr F’s complaint. CarCashPoint Limited should put things right for Mr F as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr F to accept or reject my decision before 4 January 2022. Oyetola Oduola Ombudsman

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