Not upheld: irresponsible lending - failure to conduct adequate affordability checks and failure to identify signs of financial distress complaint against Brent Shrine Credit Union Limited trading as My Community Bank (MCB)

Decision detail

Summary

Mr S complained that MCB acted irresponsibly by approving two £10,000 loans (L1 in January 2023 and L2 in September 2023) without requesting supporting documentation such as bank statements, despite clear indicators of financial hardship and his 10-year gambling addiction. MCB relied on automated CRA checks, income verification, and statistical data for affordability assessments. The ombudsman found MCB's checks for L1 were reasonable and showed no concerns about affordability or over-reliance on credit. For L2, while the ombudsman determined MCB should have conducted further checks given the fourth loan application in eight months, it concluded that such checks would likely have shown the loan was affordable based on approximately £2,400 in monthly disposable income. The complaint was not upheld as MCB was not reasonably expected to discover the gambling addiction without disclosure and bank statement review was not a required lending check.

The Ombudsman's reasoning

The ombudsman applied the FCA's Credit Unions Sourcebook (CREDS) Chapter 7 requirements, which require credit unions to maintain a prudent lending policy and check both creditworthiness and sustainable affordability. For L1, MCB's automated checks were reasonable and showed no signs of financial difficulty or over-reliance on credit. For L2, although MCB should have conducted further checks given the fourth loan application in eight months, the ombudsman concluded that reasonable further checks would have shown sufficient disposable income (approximately £2,400 monthly after essential commitments) to afford the loan. The ombudsman rejected the argument that MCB should have reviewed bank statements or discovered the gambling addiction, as Mr S did not disclose this and the statements were not part of reasonable lending checks at the time.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website