Not upheld: irresponsible lending - affordability of personal loans complaint against Barclays Bank UK PLC

Decision detail

Summary

Miss R complained that Barclays irresponsibly lent her three personal loans totalling £27,000 between July 2020 and July 2021, which she could not afford to repay and which created a debt cycle. Miss R argued that Barclays should have conducted more thorough affordability checks, particularly given the rapid succession of loans and her growing indebtedness. The ombudsman found that while Barclays' checks could have been more thorough, particularly for loan 3, the bank's checks were proportionate to the circumstances and would have still resulted in approval. Using Miss R's bank statements as evidence of what Barclays could have known, the ombudsman concluded that the loans appeared affordable based on her income (including child maintenance and partner contributions), existing debt obligations, absence of missed payments, and only sporadic overdraft usage. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the FOS approach to irresponsible lending, requiring proportionate checks based on the circumstances. While finding that Barclays' checks for loans 1 and 2 likely did not go far enough, and that more checks should have been carried out for loan 3 (given it was the third loan within a year), the ombudsman concluded that even with more thorough checks using Miss R's readily available bank statements, the loans would still have appeared affordable. The ombudsman considered Miss R's regular income, other income sources (child maintenance and partner contributions), existing debt obligations, absence of missed payments, and sporadic rather than persistent overdraft usage. The ombudsman rejected the argument that pre-approval status affected the proportionality of checks required, and noted that Barclays could not reasonably have anticipated Miss R's subsequent car finance agreement.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website