Partially upheld: irresponsible lending - inadequate affordability checks complaint against Gain Credit LLC trading as Lending Stream

Decision detail

Summary

Mr W complained that Lending Stream lent to him irresponsibly by failing to conduct adequate affordability checks, particularly given his pattern of repeat borrowing and use of overdrafts. Over approximately four years, Mr W took 20 loans across five separate lending chains. The Financial Ombudsman upheld the complaint in part, finding that loans 11-14 should not have been provided without more thorough affordability checks, but that other loans were supported by proportionate checks given the breaks between lending chains and the information available to Lending Stream. The ombudsman ordered Lending Stream to refund all interest, fees and charges on loans 11-14 with 8% simple interest and remove adverse credit file information relating to those loans.

The Ombudsman's reasoning

The ombudsman applied a proportionality test to affordability checks, recognizing that less thorough checks are appropriate for early loans in a chain but more detailed checks become necessary when warning signs emerge such as overlapping loans, repeated borrowing, or high repayment obligations. Breaks of 6-9 months between lending chains were deemed sufficient to reset the lending relationship, treating Mr W as a new customer and reducing the proportionality threshold for subsequent chains. While loan 5 required further checks due to overlapping repayments, the bank statements showed it would have been affordable anyway. Loans 11-14 were upheld because proportionate checks were not conducted despite the pattern of lending. Loans 15-20 were not upheld because they commenced new lending chains where proportionate checks were carried out and showed affordability.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website