Upheld: irresponsible lending / unaffordable credit complaint against Creation Consumer Finance Limited

Decision detail

Summary

Mr S complained that Creation Consumer Finance Limited irresponsibly provided him with an unaffordable credit account with a limit of £2,375.00 in July 2023 for a purchase of £2,374.00. The ombudsman found that Creation's affordability checks were defective, particularly due to address discrepancies between the credit agreement and actual documentation, and lack of verification of Mr S's stated income and living costs. Evidence showed Mr S had a county court judgment, defaulted accounts, and another lender had written off approximately £26,000.00 of his debt shortly after this agreement was taken out, indicating he could not sustainably repay £180 per month. The complaint was upheld and Creation was ordered to remove all interest, fees and charges from the account and arrange a suitable repayment plan for the remaining capital balance of £2,374.00.

The Ombudsman's reasoning

The ombudsman found that Creation's affordability checks were neither reasonable nor proportionate. The address discrepancy between the credit agreement and actual documentation raised serious questions about the veracity of the credit check. Most critically, the evidence provided by Mr S showed he had a county court judgment, defaulted accounts, and another lender had written off approximately £26,000.00 of his debt shortly after this agreement was taken out. This powerful indicator demonstrated that Mr S could not sustainably repay £180 per month. Creation failed to verify Mr S's stated income of £36,000.00 or establish his living costs, and only verified ability to repay approximately £80 per month when the agreement required £180 per month.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website