Not upheld: Irresponsible lending complaint against Salary Finance Loans Limited

Decision detail

Summary

Mr T complained that Salary Finance Loans Limited irresponsibly lent him £8,000 in January 2021 for debt consolidation without properly assessing his affordability. He argued they failed to check his actual income, expenditure and financial history, and did not consider that his circumstances might change. Mr T subsequently had to find another job to afford repayments and took out a second charge mortgage to consolidate the loan. The ombudsman found that Salary Finance's affordability checks were reasonable and proportionate, including verification of income with his employer, estimation of housing and living costs, and credit file review showing no adverse information. With calculated disposable income of £133 per month remaining after expenses, the ombudsman concluded the loan was affordable and that Salary Finance acted fairly in approving it, particularly as it consolidated higher-interest credit card debt. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the regulatory requirement for reasonable and proportionate affordability checks that are borrower-focused. The checks conducted by Salary Finance were proportionate given the consolidation loan purpose, verified income, and absence of adverse credit information. The ombudsman found the disposable income calculation of £133 per month was sufficient and that Salary Finance reasonably believed the loan would improve Mr T's overall financial situation by consolidating higher-interest credit card debt into a lower-cost loan repaid more quickly. The ombudsman noted that Mr T did not communicate his priority to reduce monthly outgoings to Salary Finance, and the loan contract was clear about monthly repayment amounts.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website