Not upheld: irresponsible lending complaint against Shop Direct Finance Company Limited

Decision detail

Summary

Miss B complained that Shop Direct lent irresponsibly by approving her account in April 2020 with a £600 limit and increasing it to £1,000 and £1,600 in subsequent months, and continuing to allow BNPL transactions after she entered a debt management plan in 2022. Shop Direct argued they conducted proportionate checks considering her income, external credit, and account management. The ombudsman found that Shop Direct's checks were reasonable and proportionate at each stage, Miss B's account was well-managed with payments exceeding minimums, and no information indicated financial difficulty until her first missed payment in September 2023. The complaint was not upheld.

The Ombudsman's reasoning

Shop Direct was required to carry out proportionate checks considering the type, amount, duration and cost of credit, and the borrower's circumstances. At account opening, the £600 limit was modest relative to Miss B's income and external commitments, with no adverse credit indicators. For the limit increases within a year of opening, Shop Direct reasonably considered her well-managed account, low utilisation, payments exceeding minimums, and continued absence of adverse credit information. BNPL transactions within the existing credit limit do not constitute further lending requiring new checks. No information available to Shop Direct indicated financial difficulty before September 2023.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website