Not upheld: irresponsible lending - credit limit increases without adequate affordability checks complaint against Next Retail Limited trading as Next Online

Decision detail

Summary

Mrs T complained that Next irresponsibly approved a credit account in January 2020 and increased limits from £900 to £5,000 over five years without adequate affordability checks, despite her fixed pension income and increasing external borrowing. Next argued it conducted credit checks using CRAs and internal data, finding Mrs T's credit well-managed with no adverse information or missed payments. The ombudsman found that Next's checks were reasonable and proportionate given Mrs T's clean credit history and good account conduct, and that even if bank statements had been reviewed, they would have shown sufficient disposable income to support the increased limits, with no obvious signs of financial stress.

The Ombudsman's reasoning

The ombudsman concluded that while there are no set list of checks lenders must carry out, they should be borrower-focused. Given Mrs T's clean credit history, well-managed external borrowing, good account conduct with Next, and no signs of financial stress, the checks Next undertook were reasonable and proportionate. Even if Next had obtained bank statements showing disposable income of £850-£775 monthly, this would have indicated the increased limits were affordable. The ombudsman noted that simply having fixed income and external borrowing is not itself a reason to refuse credit if there are no obvious signs of financial stress.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website