Not upheld: Irresponsible lending complaint against First Rate Credit Union Limited

Decision detail

Summary

Miss M complained that First Rate Credit Union Limited lent to her irresponsibly by providing a £9,000 personal loan in December 2023 when she had poor credit, existing debts of nearly £30,000, and a history of payday lending. FRCUL had conducted credit checks, obtained Miss M's payslip and bank statements, and calculated she had approximately £550 monthly disposable income with £350 remaining after loan repayments. The ombudsman found FRCUL's checks were thorough and the lending decision was fair, as Miss M had not missed payments in the preceding year and FRCUL was entitled to expect she would use the loan to consolidate higher-interest debts as she had stated. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that FRCUL conducted thorough checks by obtaining verified evidence of Miss M's income and expenditure and performing a full affordability assessment. Although Miss M had significant existing debts and prior payday lending history, she had not missed payments in the preceding twelve months and the loan repayments were affordable based on her verified disposable income of approximately £550 per month. FRCUL was entitled to expect Miss M would use the loan as stated to consolidate higher-interest debts, which would have improved her financial position. The ombudsman noted that each complaint must be decided on its own merits and that Miss M's failure to use the loan as intended was not FRCUL's responsibility.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website