Mitsubishi HC Capital UK PLC · DRN-6179854

The complaint Miss J complains Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance (Novuna) acted irresponsibly when it approved a loan account for her. What happened Miss J says Novuna approved a loan for consolidation purposes in October 2024 for £25,000. Miss J says at that time she was in financial distress and had been in an unmanageable cycle of debt for the past two to three years. Miss J says if Novuna had carried out more thorough checks it would have seen she had little disposable income due the high level of debt she owed. Miss J wants Novuna to refund all interest on the loan account and place the debt onto an affordable payment plan. Novuna says before it approved the loan it obtained information using Miss J’s application where she’d declared an income of £45,000, which it verified using industry standard credit tools. Novuna says Miss J’s credit file showed no obvious financial issues and from its affordability calculation, using credit reference agency (CRA) data, this showed the new loan was affordable. Novuna says the loan was used to clear existing debts and overall Miss J was in a better financial position as a result. Novuna says its decision to lend was responsible. Miss J wasn’t happy with Novuna’s response and referred the matter to this service. The investigator looked at all the available information and upheld the complaint. The investigator pointed out that there are no set list of checks lenders like Novuna must carry out but these should be borrower focused. The investigator says Novuna carried out financial checks using CRA and Office for National Statistics (ONS) data, which indicated Miss J had managed her existing debts well. The investigator felt given the amount of the level of existing external unsecured debt, Novuna should have completed further financial checks. The investigator says she obtained bank statements from Miss J leading up to the loan approval, which showed her actual income was around £500 per month less than what Novuna had used in its affordability assessment. The investigator says after calculating Miss J’s actual monthly expenses, this meant she would be left with no disposable income at the time, which meant Novuna didn’t make a fair lending decision and the loan wouldn’t therefore be sustainable over a five year period. The investigator instructed Novuna to refund all interest charged on the loan and if any capital balance remained outstanding then it should arrange an affordable payment plan with Miss J. Novuna didn’t agree with the investigator’s view and asked for the matter to be referred to an

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ombudsman 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 will also be upholding this complaint and I will explain how I have come to my decision. I was sorry to hear Miss J has found herself in a cycle of debt that she is struggling with and that must be a source of worry for her. When looking at this complaint I will consider if Novuna acted fairly when it approved a loan of £25,000 for Miss J in October 2024. Both Miss J and Novuna have provided this service with comprehensive details of the course of events here and while that has proved helpful, I won’t be commenting on every point made as I don’t feel it’s necessary in order to come to a full and impartial decision here. That’s not to say I haven’t considered everything that’s been said – I have. But it’s just that I don’t need to comment on each individual point here in order to reach a decision on what’s fair and reasonable. Novuna says the financial checks it undertook before the loan was approved were reasonable and its decision to lend was fair. Novuna have pointed out the loan was used for debt consolidation purposes and Miss J would have been in a better financial position as a result. Novuna have made the point there was no adverse information on Miss J’s credit file at the time, and its affordability calculation indicated Miss J’s net disposable income was considered enough to meet her living costs, from the ONS data it had used. While I understand the points Novuna makes here, I’m not fully persuaded by its argument and I will go on to explain why. As the investigator has pointed out there are no set list of checks lenders like Novuna must carry out before approving credit facilities, but these should be borrower focused taking into account the amount, type, term and cost of any borrowing. What is important to add here is given the amount, the five year term and purpose of the loan and the fact Miss J had a high debt to income ratio, I feel a more forensic affordability assessment would have been more appropriate. I say this as the consolidation loan was for a sizeable amount, committed for five years and Novuna would have seen even by its own calculation of net income, Miss J’s debt to income ratio was high at around 130%. So in these circumstances, I would expect a lender to be clear that any new borrowing was both affordable and sustainable and I can’t say Novuna could have been satisfied it was, at the time it approved the loan. The reason I say that is although the loan was for consolidation purposes, and arguably Miss J’s total debt if used for that purpose wouldn’t have increased, the credit file showed Miss J had a background of continued refinancing. So with that in mind I take the view there were sufficient signs to suggest further information would be needed, before Novuna could be satisfied the new borrowing was sustainable. So with that in mind I would have expected Novuna to have ensured the information regarding Miss J’s income and expenditure was correct, and an obvious way to have done that was for it to simply ask for say three months bank statements and /or sight of say payslips.

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If Novuna had carried out such checks it would have become clear that Miss J’s true income averaged around £2,300 per month, approximately £500 per month less than it had used in its affordability calculations. This meant that at the time the new loan was approved Miss J’s net monthly disposable income was only £243, after allowing for her day to day living expenses, meaning she would not have been able to afford the new loan of £626 per month. While I understand savings could have been made by consolidating external borrowing, Novuna wouldn’t at that time have been aware fully of what those savings would come to nor whether the new loan was simply recycling debt. So if Novuna had asked for more information it would have seen Miss J had a history of refinancing her debts. Miss J’s bank statements actually showed a refinance transaction that had happened only two months earlier, which would be of a concern to any lender. So on balance I am satisfied if Novuna had carried out a more forensic examination of Miss J’s true income and expenditure, it would have in all likelihood come to a different conclusion regarding affordability for the reasons I have already stated. I’ve also considered whether Novuna acted unfairly or unreasonably in some other way given what Miss J has complained about, including whether its relationship with her might have been unfair under s.140A Consumer Credit Act 1974. However, because I am upholding this complaint for the reasons I have already explained, I don’t think I need to make a finding on this. I believe the redress I have suggested results in fair compensation for Miss J in the circumstances of her complaint. While Novuna will be disappointed with my decision, I am satisfied this is a fair outcome. Putting things right I instruct Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance to rework the account removing all interest fees and charges that have been applied. If the rework results in a credit balance, this should be refunded to Miss J along with 8% simple interest per year* calculated from the date of each overpayment to the date of settlement. Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance should also remove any adverse information regarding this account from Miss J’s credit file. Or, if after the rework there is still an outstanding balance, Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance should arrange an affordable payment plan with Miss J for the remaining amount. Once Miss J has cleared the balance, any adverse information in relation to the account should be removed from her credit file. *HM Revenue & Customs requires Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance to deduct tax from any award of interest. It must give Miss J a certificate showing how much tax has been taken off if she asks for one. My final decision My final decision is that I uphold this complaint.

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Under the rules of the Financial Ombudsman Service, I’m required to ask Miss J to accept or reject my decision before 27 April 2026. Barry White Ombudsman

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