Not upheld: irresponsible lending - inadequate affordability checks and credit limit increases complaint against NewDay Ltd, trading as Fluid

Decision detail

Summary

Miss D complained that Fluid irresponsibly opened a credit card account with an initial limit of £1,200 in June 2020 and subsequently increased it five times to £7,200 by June 2022, arguing that insufficient checks would have revealed unaffordable repayments. Fluid relied on Miss D's declared salary of £29,000 and credit reference agency data showing no adverse information. The ombudsman found that while Fluid should have verified Miss D's income when CATO estimates showed significantly higher figures than declared, an affordability assessment using her actual bank statement income of £2,600-£2,800 per month showed sufficient disposable income remained after essential expenses. Therefore, the ombudsman concluded that Fluid would have reached the same affordability conclusion had it performed proper verification, and the complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the regulatory requirement for reasonable and proportionate affordability checks that are borrower-focused, considering whether repayments would cause difficulties or adverse consequences. While Fluid's initial checks were reasonable, the ombudsman found that Fluid should have verified Miss D's income when CATO estimates showed a significant and increasing discrepancy from her declared salary. However, when the ombudsman conducted its own affordability assessment using Miss D's actual bank statement figures (net monthly income of £2,600-£2,800), there appeared to be sufficient disposable income remaining after essential expenditure. Therefore, Fluid would likely have reached the same conclusion of affordability had it performed proper verification checks, meaning the lending was not irresponsible.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website