Not upheld: irresponsible lending complaint against HSBC UK Bank Plc

Decision detail

Summary

Mr H complained that HSBC irresponsibly provided him with a credit card in October 2018 with a £6,500 limit and subsequently increased it to £9,000 in July 2019. HSBC could not provide evidence of conducting reasonable affordability checks at either stage. The ombudsman found that while HSBC's failure to evidence checks was a shortcoming, applying a counterfactual test based on Mr H's £38,000 annual income, existing credit commitments, and demonstrated payment management, proportionate checks would likely have shown the lending was affordable and sustainable. The ombudsman rejected arguments that the pattern of escalating revolving debt and loan consolidation indicated unsustainable borrowing, concluding that consolidation could demonstrate responsible debt management. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman acknowledged that HSBC failed to provide evidence of reasonable and proportionate affordability checks. However, the ombudsman applied a counterfactual test, considering what checks would likely have revealed about affordability at the time. The ombudsman distinguished between what Mr H actually paid (significantly above minimum) and what HSBC would have needed to consider (sustainable repayments enabling repayment within a reasonable period). Based on Mr H's income, essential expenditure, existing credit commitments, and the loan consolidation undertaken, the ombudsman concluded proportionate checks would likely have shown the lending was affordable and sustainable. The ombudsman rejected the argument that consolidation indicated unsustainable borrowing, noting it can demonstrate responsible debt management. The ombudsman also rejected reliance on other lenders' decisions, emphasizing individual assessment of circumstances.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website