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- 3Decide
- 4Ruling
Case 6 of 19 · Level 1
Home credit loans
Five loans, one lender
The file · about 5 minutes
The complaint
The customer took five loans from a home credit lender. They kept up the repayments, though some were late and all were a struggle. They say the loans were not affordable for them, and that reasonable checks would have revealed this.
The firm's answer
The lender says its agent went through the customer's income and spending before lending: £400 a week coming in and £270 going out. Even with loans running side by side, the most the customer had to pay was £100. It also ran credit checks. It says the loans were affordable, and the fact they were repaid shows it.
Evidence in the file
Exhibit A · The loans
Loans of £200 and £250, then £750 taken the same day the second loan was paid off. Loans four and five came while the third was still being repaid.
Exhibit B · The lender's checks
An income and spending check by the lender's agent, and a credit check, though the lender has said little about what the credit check found.
What the lender's credit checks showed
The lender's credit checks showed the customer had recently entered into repayment arrangements on two payday loans.
The repayment record
Every loan was repaid in the end. Some payments were late, including on the second loan.
What checks a lender has to make
Background, not from this file: there is no fixed list of checks. The ombudsman looks at how much was borrowed, how much had to be repaid and over what period, and what the lender knew about the borrower's finances.
Uphold the complaint, or side with the firm?
The ruling
Given by the ombudsman
Partly upheld
Why
The first two loans were small, so the lender's checks were enough and that part was not upheld. The third was much larger, taken the day the second was cleared, after more than a year in debt to the lender. Its credit checks showed recent payday loan arrangements, which called for a full look at the customer's finances. That would have shown they could not repay without borrowing more, so loans three to five should not have been given.
What the firm had to do
Refund the interest and charges on loans three to five, adding interest, and remove any negative information the lender had recorded on the customer's credit file.
What an adjudicator takes from this. Repaying a loan does not prove it was affordable. Ask what the lender already knew when it said yes.
Rewritten in our own words from a case the ombudsman published.
What is fair and reasonable is a judgement. The ombudsman gives one; people who read the same file often give another, and this game is about how people weigh the same facts, not about being right. Built from cases the Financial Ombudsman Service and other bodies have published, and from Docketory's own files, rewritten in our own words with every name removed. Docketory is not connected with any of them, and this game is not advice on your own case.
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