Not upheld: irresponsible lending complaint against HSBC UK Bank Plc

Decision detail

Summary

Mrs B complained that HSBC lent to her irresponsibly in relation to three personal loans taken in January 2021, January 2025, and May 2025 (Loans 2, 3, and 4). Loan 2 for £15,000 was used primarily to consolidate an overdraft at a lower interest rate, with verified income of £1,974 per month plus household support from her husband. Loan 3 for £12,000 was taken four years later when Mrs B had retired, though HSBC used an outdated income figure; the loan consolidated the overdraft and previous loan. Loan 4 for £13,340 was taken just four months after Loan 3 for home improvements, with HSBC conducting additional checks due to the short timeframe. The ombudsman found that HSBC conducted proportionate affordability checks for all three loans and that Mrs B could afford the repayments based on verified income from bank statements and her husband's contributions, therefore not upholding the complaint.

The Ombudsman's reasoning

The ombudsman applied the principle that lenders must carry out proportionate checks to ensure lending is sustainable, with less thorough checks being reasonable in early lending relationships unless risk factors suggest otherwise. For Loan 2, the checks were proportionate given the two-year gap since the previous loan, low debt levels, and positive credit history; the loan was used to consolidate overdraft debt at a lower interest rate, demonstrating positive financial management. For Loan 3, although HSBC used an outdated income figure of £42,000 when Mrs B had retired, the ombudsman found that even using verified income from bank statements (approximately £3,227 from pension and benefits plus husband's support), the loan remained affordable; the loan was for debt consolidation and her overall financial position was positive. For Loan 4, HSBC conducted additional checks due to the proximity to the previous loan and recent overdraft limit increase; the credit search showed no financial issues, low credit card utilization, and even using conservative income figures, the loan appeared affordable. The ombudsman rejected Mrs B's arguments regarding her cognitive issue (not disclosed until August 2025) and events in 2011 (no evidence HSBC knew of them) as factors HSBC should have considered.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website