Not upheld: irresponsible lending - failure to carry out reasonable and proportionate affordability checks complaint against Metro Bank PLC trading as RateSetter

Decision detail

Summary

Miss B complained that Metro Bank PLC failed to carry out reasonable and proportionate affordability checks before approving two loans (£6,000 in February 2020 and £10,000 in October 2023), arguing that if proper checks had been done, Metro would have identified the loans as unaffordable given her high external debt and unstable income. Miss B pointed to her current arrears on the second loan as evidence of unaffordability. Metro defended its lending decisions, stating it had conducted detailed assessments using CRA data, income verification tools, bank statements, and underwriter assessments. The ombudsman did not uphold the complaint, finding that Metro's checks were reasonable and proportionate, the loans appeared affordable based on verified income and calculated expenses, and there were no signs of financial stress or over-indebtedness at the time of approval.

The Ombudsman's reasoning

The ombudsman found that there is no prescriptive set list of checks lenders must carry out, but they should be borrower-focused and proportionate to the amount, type, term and cost of borrowing. For Loan 1, Metro's checks using CRA data, income verification tools, and application information were reasonable given Miss B had modest credit levels with no recent issues and the loan appeared affordable based on her verified income and calculated living expenses. For Loan 2, Metro's additional step of obtaining bank statements was appropriate given increased external borrowing, and the statements confirmed income levels consistent with Metro's affordability assessment. Miss B's external debts of £22,500 were well-managed with no signs of financial stress, and the loan payments remained affordable relative to her verified income with sufficient reserve for unforeseen costs.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website