BMW Financial Services (GB) Limited · DRN-6256111

The complaint Mrs P has complained that BMW Financial Services (GB) Limited, trading as BMW Financial Services, (“BMWFS”) declined her application to refinance the amount due under her hire purchase agreement for her car at the end of the initial term. What happened Mrs P acquired a new BMW in March 2021 using a hire purchase agreement with BMWFS. The cost of the car was £66,365.40, of which Mrs P borrowed £64,062.40. The monthly payment was £846.47 over a term of 48 months, with a final balloon payment of £29,676.29 due if Mrs P wanted to keep the car at the end of the term. From December 2021 to November 2022, some direct debits were returned unpaid, but it looks as though the relevant payments were made up afterwards. From November 2022 to March 2023, the account was always in arrears – and at one point the amount equalled four monthly payments. The account was then brought up to date, and remained so until July 2023, although direct debits usually had to be resubmitted to the bank after initial non- payment. After that the account fell into arrears again. During this time Mrs P agreed a payment plan to bring the account up to date, but the agreed payments were not made. The arrears were only cleared at the end of the agreement in March 2025. The balloon payment became due in March 2025. Mrs P obtained quotes from BMWFS to refinance the balloon payment over three and four years, with a lower monthly payment but again with a lump sum payable at the end of the new term. However, when Mrs P applied for the new finance agreement, BMWFS declined her application. Mrs P then offered her father as guarantor, but BMWFS didn’t change its decision. It wrote to Mrs P in March 2025 saying that the main reason for declining her application was adverse information held about her at the credit reference agencies; her original agreement was in arrears, there was a credit card over the limit and reported as being unpaid, and other financial accounts were in default. Mrs P complained to BMWFS, saying that she felt she had been treated unfairly. It issued a final response letter in August 2025, saying it didn’t uphold her complaint. Mrs P then brought her complaint to this service, saying that she had met her obligations under the previous agreement and could comfortably afford the new payments – and had her father available as guarantor. Mrs P said the situation had put her under considerable strain as she was also dealing with housing insecurity and had poor mental health. She wanted BMWFS to refinance the balloon payment in line with its quotations. Mrs P also felt that BMWFS had not been transparent about the reasons for its refusal to do so in its final response letter. BMWFS later accepted that its final response letter hadn’t been detailed enough, and said it would pay Mrs P £50 in recognition of this. Mrs P didn’t accept this offer and wanted to pursue the complaint. Our investigator looked into Mrs P’s complaint, but, although he thought BMWFS should make the payment of £50 relating to the final response letter, he didn’t think it would be fair to ask BMWFS to do more. Mrs P disagreed and asked for the complaint to be reviewed by an ombudsman.

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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. I’ve decided to uphold a very limited part of Mrs P’s complaint – that related to the final response letter not being detailed enough. But I don’t uphold the other elements of the complaint. I’ll explain why. Mrs P sent in information about her personal circumstances, and a letter confirming that her father was willing to act as guarantor. BMWFS sent in copies of the original agreement, a list of transactions, notes of its contact with Mrs P, and letters to her about arrears on her agreement (including default notices). I should say here that, in response to our investigator’s view, Mrs P said that she would send in further evidence for consideration. However, no new evidence has been provided. BMWFS had carried out credit checks when Mrs P applied for the hire-purchase agreement in 2021, and at that time she had a good credit record. However, there were frequent arrears on the agreement, as I’ve described above, over the course of the original term. When Mrs P applied to refinance the balloon payment in March 2025, BMWFS carried out a new assessment. However, her financial situation had deteriorated, and BMWFS told us that its credit checks indicated a high level of indebtedness. Mrs P was near her maximum overdraft limit, and one credit card was showing six missed payments. Four defaults were also showing, with the latest from February 2025. BMWFS also took account of Mrs P’s poor payment history on her original agreement. It concluded that new lending to Mrs P was too high a risk and therefore it declined her application. BMWFS also said that, because of the level of risk that it identified, it did not consider accepting Mrs P’s father as guarantor, so it carried out no checks on his circumstances. I’ve thought carefully about what both parties have said. I appreciate that Mrs P was going through a difficult time, and the situation must have been stressful. However, BMWFS has the right to decline an application for finance – this is a commercial decision (provided it is legal and does not discriminate). And regulatory rules, which it must follow, require it to lend responsibly. In summary, it has to make reasonable and proportionate checks to look at whether a customer can make repayments sustainably on any finance agreement. In Mrs P’s case, I accept that, based on the quotes BMWFS issued, the payments on the proposed new agreement were lower than those on the original agreement .But given the information BMWFS found when it looked at Mrs P’s credit record, and her repayment history on the original agreement, I consider BMWFS made a reasonable decision when it decided it could not grant the refinancing of the balloon payment. I have no evidence to suggest that it didn’t apply the regulatory rules on responsible lending correctly, or that it otherwise acted unfairly in declining the application. I’ve also thought about what Mrs P said about her father being willing and able to act as a guarantor. As I noted above, BMWFS said that in light of its view of the risk of further lending to Mrs P, it didn’t consider the option of a guarantor. The regulatory rules on responsible lending require BMWFS to consider affordability before taking account of any guarantor – so in this case it had to look at Mrs P’s ability to make the repayments sustainability before it did anything else.

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A guarantor tends to be used when the decision about whether to lend is not clear cut. This does not seem to be the case here. BMWFS thought that the new agreement wasn’t affordable for Mrs P, and in those circumstances, I think it was it was entitled to decide that it did not want to lend at all – even with a guarantor. I’ve no evidence to show that it acted unfairly or unreasonably in reaching that decision. Mrs P said that she thought BMWFS didn’t take account of her vulnerability – I noted above that Mrs P said she was dealing with housing insecurity and poor mental health. I appreciate that this would’ve been difficult for Mrs P, but given that she was clearly under financial strain I think it was reasonable for BMWFS to decide that it wouldn’t be appropriate to grant the refinancing agreement and add a continuing financial commitment for her. I understand that Mrs P feels strongly about this, but in summary I don’t think BMWFS acted unfairly in declining the application for refinancing, or in declining to lend with a guarantor. So I don’t uphold these main elements of her complaint. Mrs P also said that BMWFS’s final response lacked transparency on the exact reasons for refusal. Having reviewed the final response letter, I agree that BMWFS could have been clearer in explaining to Mrs P why it had reached its decision, and I can see that this would have been very frustrating. So, although this is a relatively minor part of Mrs P’s complaint, I have decided to uphold this element of it. I noted above that BMWFS accepted this and had offered £50 in recognition of this lack of clarity. I think this is fair so it should pay this amount to Mrs P. But I don’t consider I can fairly require it to do anything more. Putting things right BMWFS should pay Mrs P £50 in recognition of the lack of clarity of its response to her complaint. My final decision For the reasons given above, I have decided to uphold the element of Mrs P’s complaint relating to the lack of clarity of the final response letter, and to require BMW Financial Services (GB) Limited to compensate Mrs P as stated above, I have decided not to uphold the other elements of Mrs P’s complaint - that is, those relating to the lending decisions. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs P to accept or reject my decision before 24 April 2026. Jan Ferrari Ombudsman

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