Not upheld: irresponsible lending - affordability and credible repayment strategy complaint against Social Money Limited

Decision detail

Summary

Mr J and Mrs N complained that Social Money irresponsibly lent them a £357,000 second charge bridging loan in July 2023 to address a tax liability arising from business difficulties. The loan was to be repaid within 15 months, with the exit strategy being re-financing once their credit files improved. When re-financing proved impossible at the end of the term, Social Money appointed receivers and pursued repossession, with the outstanding balance growing to over £560,000. The ombudsman found that while the broker was responsible for advising on suitability, Social Money as lender had acted reasonably in relying on re-financing as a plausible exit strategy at the time of lending, and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman distinguished between the broker's responsibility for advising on suitability and Social Money's responsibility as lender to ensure affordable lending with a credible repayment strategy. While the complainants disputed the broker's statement that they agreed to sell the property, the ombudsman could not consider complaints about the broker's advice as the broker was acting on behalf of the borrowers, not Social Money. Taking bridging finance as a short-term solution until mainstream finance becomes available is a standard purpose of bridging loans. Re-financing was a plausible exit strategy at the time of lending, and while it unfortunately did not work out in practice, this was not something Social Money ought reasonably to have predicted. The requirement to pay off the existing second charge was reasonable to protect Social Money's position.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website