Not upheld: irresponsible lending - inadequate affordability checks complaint against Clydesdale Bank Plc, trading as Virgin Money

Decision detail

Summary

Miss M complained that Virgin Money was irresponsible in providing her with a credit card in January 2023 (£7,200 limit) and increasing it in November 2023 (to £12,200), arguing that insufficient affordability checks would have revealed unaffordable repayments. Virgin Money and the ombudsman disagreed with the investigator's view that the complaint should be upheld. The ombudsman found that while Virgin Money's initial checks were reasonable, the high existing debt (£38,000) relative to Miss M's declared salary (£46,000) warranted further checks into actual income and committed expenditure. However, upon conducting such an analysis using bank statements and including her partner's contributions, the ombudsman calculated sufficient disposable income (£574 per month) to support the repayments, concluding Virgin Money would have reached the same lending decision if it had performed more thorough checks, and therefore did not lend irresponsibly.

The Ombudsman's reasoning

The ombudsman applied the regulatory requirement for reasonable and proportionate affordability checks that are borrower-focused. While Virgin Money's initial checks were reasonable, the ombudsman found that given the high existing debt relative to salary, further checks into actual income and committed expenditure would have been proportionate. However, when the ombudsman conducted such a review using Miss M's bank statements, including her partner's contributions, the analysis showed sufficient disposable income (£574 per month) to support the credit card repayments. Therefore, Virgin Money would likely have reached the same conclusion if it had performed further checks, making the lending decision not irresponsible.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website