Upheld: irresponsible lending - inadequate affordability checks and failure to verify income complaint against Nationwide Building Society

Decision detail

Summary

Mrs T complained that Nationwide lent to her irresponsibly by approving two loans she could not afford. Loan 1 (£1,000, July 2024) was approved despite Mrs T's debt payments representing over 50% of her £1,453 net monthly income. Loan 2 (£1,971.45, August 2024) consolidated Loan 1 but was approved based on a claimed income increase to £1,900 within six weeks, which Nationwide failed to verify despite having access to her bank statements. The ombudsman upheld the complaint, finding both loans were unaffordable and directing Nationwide to refund interest and charges on Loan 1, remove all interest and charges from Loan 2, and establish a reasonable repayment plan for any remaining balance.

The Ombudsman's reasoning

Nationwide failed to carry out proportionate affordability checks for both loans. For Loan 1, Mrs T's debt payments (£800+ minimum on revolving credit plus £3,585 other debt) represented over 50% of her £1,453 net income, leaving insufficient disposable income. For Loan 2, the six-week gap and Mrs T's claimed income increase from £1,453 to £1,900 should have triggered additional checks. Nationwide had easy access to Mrs T's bank statements as her current account provider and had already used them for the TAC check, making verification of the income claim a simple and proportionate step. The actual salary shown in July 2024 statements was £1,358, not £1,900, proving the income claim was false. Even using Nationwide's own affordability figures, Mrs T's debt payments exceeded 50% of her actual income, making both loans unaffordable.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website