Not upheld: irresponsible lending and unaffordable credit complaint against PayPal UK Ltd

Decision detail

Summary

Mr W complained that PayPal irresponsibly provided him with a credit account and three limit increases that were unaffordable and caused financial difficulty. The account was opened in June 2019 with a £2,000 limit, increased to £5,000 by January 2022. Mr W declared self-employed income of £2,001-£2,500 monthly with expenditure of £1,001-£2,000 monthly. The ombudsman found PayPal's checks were not proportionate as they failed to clarify Mr W's actual figures within the wide brackets, but concluded that proper checks would have shown the credit was affordable based on Mr W's declared income and his actual repayment pattern. Mr W's financial difficulties arose in late 2023 due to ill health and loss of foster carer income, which PayPal could not have foreseen. The complaint was not upheld, though PayPal's refund of interest, fees and charges from January 2022 onwards was deemed fair.

The Ombudsman's reasoning

The ombudsman found that while PayPal's initial checks were not proportionate because it failed to clarify Mr W's actual income and expenditure within the wide brackets he selected, proportionate checks would likely have revealed sufficient disposable income to afford the credit. The ombudsman rejected Mr W's forensic financial analysis as disproportionate to the credit amount involved and noted that PayPal could not have foreseen the circumstances changes in late 2023. The lending decisions were made when Mr W demonstrated he could repay within reasonable periods, and his later financial difficulties were not foreseeable at the time of lending.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website