Upheld: Irresponsible lending complaint against Zopa Limited
Financial Ombudsman decision DRN-3881326 of 2023-01-09T00:00:00+00:00. Irresponsible lending complaint against Zopa Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-3881326 |
|---|---|
| Decision date | 2023-01-09T00:00:00+00:00 |
| Firm | Zopa Limited |
| Product | Personal loan |
| Claim type | Irresponsible lending |
| Outcome | Upheld |
| Remedy | Zopa must: (1) refund all interest, fees and charges paid by Mrs A on the loan; (2) add 8% per year simple interest on refunded payments from the date paid to settlement date; (3) remove any adverse credit file information resulting from this loan. |
Summary
Mrs A complained that Zopa unfairly arranged a £4,000 peer-to-peer loan in September 2018 that she could not afford to repay. Zopa conducted an income and expenditure assessment and credit check but failed to carry out further verification despite discovering Mrs A had a debt-to-income ratio of approximately 45% and was near her limits on revolving credit accounts. The ombudsman found that reasonable and proportionate checks would have revealed Mrs A's unsustainable gambling expenditure and inability to sustainably repay the loan. The complaint was upheld and Zopa was ordered to refund all interest, fees and charges plus 8% simple interest, and remove adverse credit file information.
The Ombudsman's reasoning
Zopa's affordability checks were not reasonable and proportionate given Mrs A's high debt-to-income ratio (45%) and near-maxed revolving credit accounts. The ombudsman found that proportionate checks would have revealed Mrs A's unsustainable gambling expenditure and demonstrated she could not sustainably repay the loan without borrowing further or experiencing significant adverse consequences. The ombudsman rejected the notion that technical affordability on a strict pounds-and-pence basis was sufficient, emphasizing that sustainable repayment requires the borrower not to need further borrowing.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Zopa Limited, all decisions | 60 | 31% |
| Irresponsible lending, all decisions | 30,675 | 37% |
| Personal loan, all decisions | 23,643 | 29% |
Source
Read the original decision on the Financial Ombudsman Service website