Not upheld: irresponsible lending - inadequate affordability checks complaint against Plata Finance Limited

Decision detail

Summary

Mr G complained that Plata Finance Limited lent to him irresponsibly by granting a £5,000 loan without sufficient affordability checks, particularly given his increasing debt levels, overdraft usage, and gambling transactions. The ombudsman found that Plata's checks were not reasonable and proportionate, as nearly 50% of Mr G's monthly income was servicing existing debt and there were significant cash withdrawals. However, the ombudsman concluded that even with more thorough checks, the residual disposable income would have supported sustainable repayments, making the lending decision fair. The complaint was not upheld, though the ombudsman acknowledged sympathy for Mr G's situation regarding gambling-related issues.

The Ombudsman's reasoning

The ombudsman agreed with the investigator that Plata's checks were not reasonable and proportionate, particularly given that nearly 50% of Mr G's income was servicing existing debt and there were significant cash withdrawals. However, the ombudsman found that even with more thorough checks, the residual disposable income after the new loan would have been sufficient to sustain repayments. The ombudsman did not consider it proportionate to require current account records at the point of lending and found it reasonable to rely on the application's statement of zero gambling expenditure. The ombudsman's own affordability calculations aligned with those of Plata and the investigator, showing sustainable repayment capacity.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website