Moneybarn No.1 Limited · DRN-6235206

The complaint Mr C is complaining about Moneybarn No.1 Limited (Moneybarn). He says they were irresponsible in lending to him as the loan repayments were unaffordable. Mr C is represented in his complaint, but for ease I’ve written as if we’ve dealt directly with him throughout. What happened In February 2022, Mr C took out a conditional sale agreement with Moneybarn to finance the purchase of a car. He paid a deposit of £950 and borrowed £12,995.44 - the cash price of the vehicle was £13,945.44. The agreement required him to make 54 monthly repayments of around £473. Several of Mr C’s direct debit payments bounced, but the repayments were made by card instead. But in March 2024 Mr C voluntarily terminated the agreement, leaving him with an outstanding balance which he struggled to pay and was then sold to a third party debt purchaser. In February 2025, Mr C complained to Moneybarn, saying they shouldn’t have lent to him because the loan was unaffordable and they’d not done enough checks before lending to him. In their response, Moneybarn said they’d carried out checks before deciding to lend to Mr C. They said they’d checked his credit report and used a credit reference agency (CRA) to verify Mr C’s stated monthly income of £1,900. They added that they’d used statistical data to estimate Mr C’s non-discretionary expenditure and therefore his net disposable income. Using those figures, they’d determined the agreement was affordable for Mr C. Mr C remained unhappy and brought his complaint to the Financial Ombudsman Service where one of our investigators looked into it. Our investigator thought Moneybarn hadn’t done enough checks in the circumstances. And when he looked further into things, he said if Moneybarn had carried out reasonable and proportionate checks they’d have likely seen the agreement wouldn’t be affordable for Mr C. Moneybarn asked for the evidence our investigator had relied on. They said the income figure he’d used was significantly less than Mr C had told them he earned. And they said it was less than was shown in the open banking data our investigator had reviewed. Moneybarn also said they’d completed an income and expenditure assessment with Mr C in March 2022 which showed the agreement was affordable. As they didn’t agree with our investigator the matter’s come 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. Having done so, I’m upholding Mr C’s complaint for broadly the same reasons as our investigator. I’ll explain further below. The Financial Conduct Authority (FCA) sets out in a part of its handbook known as CONC what lenders must do when deciding whether or not to lend to a consumer. In summary, a

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firm must consider a customer’s ability to make repayments under the agreement without having to borrow further to meet repayments or default on other obligations, and without the repayments having a significant adverse impact on the customer’s financial situation. CONC says a firm must carry out checks which are proportionate to the individual circumstances of each case. Did Moneybarn carry out proportionate checks? Moneybarn said they conducted a full credit search and checked Mr C’s income using an automated check from a CRA. They also told us they’d used Office for National Statistics (ONS) data to estimate Mr C’s expenditure. They deducted the estimated expenditure from Mr C’s income and determined that he could afford the repayments necessary under this agreement. Whether or not these checks were proportionate depends on various factors, including the term of the loan, cost of credit, and overall amount repayable – as well as what Moneybarn found during their checks. Given the loan was for four and a half years, at a high interest rate, and Mr C would need to pay back over £26,500 over that time, the checks needed to be thorough. Moneybarn didn’t send us a copy of the credit report they used. Instead, they provided a summary which said Mr C had defaulted on two accounts but the most recent of these was 29 months prior to their lending decision. Whilst he was reducing the default balance, the total owed was still £1,100. The summary also showed Mr C had taken two cash advances on his credit card in the preceding three months and his utilisation of revolving credit was at 100%. I also looked at a credit report provided by Mr C to see what other data was likely available to Moneybarn. This showed that Mr C had missed a payment towards his credit card in January 2022 – just one month before the lending decision. The level of cash advances, recent missed payment, high utilisation of revolving debt, and outstanding default balances are all indicators that Mr C might have been struggling with his finances at the time. They’re indicators that either Mr C’s income or his expenditure (or both) might not be in line with what the CRA and ONS data said. And, given the term of the loan and its total cost, I’m not satisfied that it was proportionate for Moneybarn to rely solely on this data – I think they should have done more to establish Mr C’s financial circumstances. If Moneybarn had done proportionate checks, what would they have found? Proportionate checks would have involved Moneybarn finding out more about Mr C’s income and expenditure to determine whether he’d be able to make the repayments in a sustainable way. I’ve looked at open banking data for Mr C’s main bank account for the three months leading up to his application to Moneybarn. And I’ve taken into consideration open banking data from the subsequent months. I’m satisfied this data provides a good indication of Mr C’s income and non-discretionary expenditure at the time the lending decision was made. Having done so, I can see Mr C’s income in the months leading up to the lending decision was very inconsistent. But it is evident that Mr C had started a new job in January 2022 – he was being paid by the employer he listed on his application to Moneybarn. After the first couple of months his net income settled to around £1,420 per month. I appreciate Moneybarn said Mr C told them in March 2022 that he was earning around £1,863 per month. But the bank statements don’t support this figure. So, I’m satisfied that if Moneybarn had made further attempts to verify Mr C’s income with his new employer it’s likely they’d have arrived at around £1,420 per month for his net monthly figure.

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If Moneybarn had then looked further into Mr C’s spending, they’d likely have found he paid around £500 per month to another person to contribute towards rent and bills, with around £250 per month on top of this for utilities. He spent an average of around £330 per month on groceries and fuel, around £50 per month on communications, and around £60 per month repaying creditors. I’ve excluded from this analysis the payments made in relation to an existing hire purchase agreement which was settled when Mr C signed this agreement with Moneybarn. These expenses come to a total of around £1,190 – not that much more than the £1,080 Moneybarn estimated before lending to him. But, with income of £1,420 per month, that left Mr C with disposable income of around £230 per month – not enough to make the repayments needed under this agreement. I’ve also considered that Moneybarn carried out an income and expenditure assessment with Mr C in March 2022 when he missed his first payment under the agreement. They haven’t provided details of that assessment but looking at the income and disposable income figures they obtained, it appears Mr C told them his non-discretionary spending was around £1,010 per month. Using this lower figure with his actual income still would have meant the agreement would be unaffordable for Mr C. I also note that Mr C’s previous car finance agreement required payments of £197 per month – so this represented a significant increase on that. And Mr C’s bank statements show that in the months leading up to the lending decision he was overdrawn the majority of the time, had numerous returned direct debits, and had very little discretionary spending. Taking everything together, I’m satisfied that if Moneybarn had done reasonable and proportionate checks, they’d have likely found Mr C wouldn’t be able to afford the repayments under their agreement. I therefore think Moneybarn shouldn’t have lent to Mr C. Have Moneybarn acted unfairly in any other way? I’ve also considered whether the relationship might have been unfair under s.140A of the Consumer Credit Act 1974. However, I’m satisfied the redress I’m proposing below results in fair compensation for Mr C in the circumstances of his complaint. I’m satisfied, based on what I’ve seen, that no additional award would be appropriate in this case. Putting things right As Moneybarn shouldn’t have approved the loan, it’s not fair for them to charge any interest or other charges under the agreement. But Mr C had use of the car, so it is fair he pays for that use. I understand Mr C has now terminated the agreement and returned the car having used it for around 25 months. I’m satisfied the figure our investigator gave, of £6,338.64, is a reasonable amount for Mr C to pay for the use of the car. Moneybarn should now: • refund Mr C’s deposit of £950, together with simple interest at 8% per year from the date of payment to the date of settlement; • arrange to buy Mr C’s debt back from the third party, or otherwise liaise with that third party; • calculate the total Mr C has paid to Moneybarn and the third party and refund to Mr C the excess over £6,338.64 (the fair usage amount), together with simple interest at 8% per year from the date of payment to the date of settlement; and • arrange for the removal of any adverse information recorded on Mr C’s credit file regarding the agreement.

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If Moneybarn consider tax should be deducted from the interest element of my award they should provide Mr C a certificate showing how much they’ve taken off so that Mr C can reclaim that amount, assuming he is eligible to do so. My final decision As I’ve explained above, I’m upholding Mr C’s complaint. Moneybarn No. 1 Limited need to take the steps I’ve outlined above to settle the matter. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr C to accept or reject my decision before 27 April 2026. Clare King Ombudsman

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