Not upheld: irresponsible lending / failure to conduct adequate affordability assessments complaint against Great Western Credit Union Limited

Decision detail

Summary

Mrs C complained that GW irresponsibly lent to her repeatedly between December 2019 and September 2024, approving five consolidation loans totaling £15,000 without conducting thorough affordability assessments. She argued the pattern of repeated borrowing to consolidate existing debt should have been a warning sign and that the loans left her reliant on credit cards and catalogues for essential items. GW defended their lending decisions, particularly Loan 5, citing their underwriting team's consideration of income, expenditure, and credit history. The ombudsman found that while GW's checks were not always sufficiently thorough and some documentation was unavailable, had reasonable checks been conducted using Mrs C's bank statements, they would have revealed adequate disposable income to afford each loan sustainably. Accordingly, the complaint was not upheld.

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 protecting members' interests by assessing both creditworthiness and sustainable affordability. While GW's checks were not always thorough and some credit check results could not be provided, the ombudsman used Mrs C's bank statements to reconstruct what reasonable checks would have revealed. For each loan, the ombudsman calculated that Mrs C would have had sufficient disposable income after essential expenditure and existing credit commitments to afford the new loan repayments. The ombudsman noted GW's checks improved over time and that GW declined some applications, demonstrating risk awareness. The pattern of consolidation lending, while concerning, did not render the lending unfair given the calculated affordability at each stage.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website