Not upheld: irresponsible lending - inadequate affordability checks complaint against Clydesdale Bank Plc trading as Virgin Money

Decision detail

Summary

Mr A complained that Virgin Money lent to him irresponsibly by failing to make appropriate affordability checks before granting an £8,000 home improvement loan in June 2025. He argued that proper checks would have revealed £24,300 of undeclared borrowing, recent loans taken out before his application, and gambling transactions visible in his bank statements. The ombudsman found that Virgin Money's checks were not reasonable and proportionate because they failed to adequately investigate the significant undeclared borrowing and relied too heavily on summary bureau data. However, the complaint was not upheld because reconstructing what reasonable checks would have revealed showed no signs of ongoing financial distress at the time of lending, with the credit file showing no defaults, CCJs, or delinquencies. The ombudsman concluded it was reasonable for Virgin Money to use ONS data modelling for affordability assessment, and that the undisclosed gambling and other issues were not visible on the credit file and were not disclosed by Mr A himself.

The Ombudsman's reasoning

The ombudsman applied a two-stage test for irresponsible lending. On the first test, Virgin Money's checks were not reasonable and proportionate because they failed to adequately investigate the significant undeclared borrowing and relied too heavily on summary bureau data without clarification. However, on the second test, the ombudsman reconstructed what reasonable and proportionate checks would have revealed and concluded they would not have shown signs of ongoing financial distress at the time of the lending decision. The credit file showed no defaults, CCJs, or delinquencies, and the ombudsman found it reasonable for Virgin Money to use ONS data modelling for affordability assessment. While Mr A's actual financial situation may have differed from the modelled data, the undisclosed gambling and other issues causing distress were not visible on the credit file and were not disclosed by Mr A himself.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website