Not upheld: irresponsible lending complaint against Plata Finance Limited

Decision detail

Summary

Mrs Y complained that Plata Finance Limited irresponsibly lent her £5,000 in October 2023, which was unaffordable given her personal and financial circumstances. Plata obtained Mrs Y's declared income and expenditure, cross-checked her income against credit reference agency data, and conducted credit searches showing no adverse information. The ombudsman found that Plata's checks were proportionate and that Mrs Y appeared to have sufficient funds for the monthly repayments of around £213 after accounting for her other credit commitments and estimated living expenses. Although Mrs Y had taken out another concurrent loan and had a history of overdraft usage, the ombudsman found that Plata could not reasonably have been aware of these facts, as proportionate checks would not extend to obtaining bank statements. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the FOS approach to unaffordable and irresponsible lending, finding that Plata's checks were proportionate for an early-stage lending relationship. The lender validated Mrs Y's income against credit reference data, conducted credit searches, and calculated that after deducting validated credit commitments and estimated living expenses from her income, she had sufficient funds for the loan repayments. The ombudsman found that Plata could not reasonably have been expected to know about the concurrent loan application or historical overdraft usage, and that no regulatory prohibition exists against lending to overdraft users. The ombudsman also considered section 140A of the Consumer Credit Act 1974 but found no unfairness.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website