Not upheld: Irresponsible lending complaint against United Trust Bank Limited

Decision detail

Summary

Mr F and Miss H complained that UTB irresponsibly lent them a second charge mortgage of approximately £21,560 in February 2019 for debt consolidation, which they claimed was unaffordable and caused further financial difficulties. The loan consolidated five credit cards and a personal loan but did not clear all unsecured debt, and Mr F is now contemplating bankruptcy while Miss H seeks creditor arrangements. UTB assessed affordability using actual income and credit commitments verified from payslips and credit records, but used modelled household expenditure based on ONS data rather than actual expenditure. The ombudsman found that this methodology was compliant with regulatory rules at the time and that UTB carried out the required affordability assessment, which showed the loan was affordable. Although acknowledging the loan was unaffordable in reality, the ombudsman did not uphold the complaint as UTB was not required to obtain actual expenditure information and therefore could not have known about the customers' true financial circumstances.

The Ombudsman's reasoning

The ombudsman found that UTB's affordability assessment methodology was compliant with regulatory rules at the time. The rules expressly permit lenders to use modelled expenditure rather than actual expenditure for basic essential and quality of living costs, provided realistic assumptions are applied. UTB used ONS data adjusted appropriately for the household composition and income level, which constituted realistic assumptions. Although the ombudsman acknowledged that the loan was unaffordable based on Mr F and Miss H's actual financial circumstances, UTB was not required to obtain actual expenditure information and therefore could not have known about the unrealistic figures provided to the broker. The affordability assessment showed the loan was affordable under the permitted methodology, and UTB carried out the assessment required by the regulator.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website