Not upheld: Irresponsible lending complaint against Prestige Finance Limited

Decision detail

Summary

Mr and Mrs D complained that a second charge mortgage secured loan borrowed in 2005-2006 was mis-sold as unaffordable and that unfair fees were added over the years. The loan was originally unregulated and outside FOS jurisdiction; it was later transferred to Prestige Finance Limited in 2014. While the ombudsman could not review the original lending or fees added before 2014, it examined whether the relationship became unfair overall. The ombudsman found the original lending met standards of the time, with income verification and reasonable loan-to-income ratios. Mr and Mrs D's arrears in 2006-2007 resulted from changed circumstances including Mr D's ill health and rising interest rates, not unaffordable lending. The lender worked with them to clear arrears through an agreed arrangement. The ombudsman concluded no ongoing unfairness existed for Prestige to remedy by the time the loan ended in 2019, and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman found that while the original lending decision and fees fell outside FOS jurisdiction (as the loan was unregulated and predated Prestige's involvement), the key question was whether the relationship became unfair overall. The evidence suggested Mr and Mrs D fell into arrears due to changed circumstances (rising interest rates and Mr D's ill health) rather than irresponsible lending. The original lending standards were met, with income verification and credit file review. The lender worked with Mr and Mrs D to clear arrears through an agreed arrangement and ultimately allowed early redemption. The fees and interest added were permitted by the loan terms and flowed from the arrears themselves. Therefore, there was no ongoing unfairness for Prestige to remedy by 2019.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website