Upheld: irresponsible lending - failure to conduct adequate affordability checks complaint against Shawbrook Bank Limited
Financial Ombudsman decision DRN-6323594 of 2026-05-01T00:00:00+00:00. irresponsible lending - failure to conduct adequate affordability checks complaint against Shawbrook Bank Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-6323594 |
|---|---|
| Decision date | 2026-05-01T00:00:00+00:00 |
| Firm | Shawbrook Bank Limited |
| Product | personal loan |
| Claim type | irresponsible lending - failure to conduct adequate affordability checks |
| Outcome | Upheld |
| Remedy | 1. Refund all repayments made under the Credit Agreement and cancel any outstanding balance. 2. Refund annual management charges paid for Fractional Club membership and the difference between the trade-in value of trial membership and the capital sum refinanced from the trial membership loan. 3. Deduct the value of promotional giveaways used and the market value of holidays taken using Fractional Points (or alternatively, deduct annual management charges for years in which holidays were taken). 4. Add simple interest at 8% per annum to net repayments from the date each was made until settlement. 5. Remove any adverse credit file information relating to the Credit Agreement recorded within six years of the decision. 6. If membership is still in place, the lender must indemnify Miss O against all ongoing liabilities provided she agrees to hold the benefit of her interest in the Allocated Property for the lender or assign it to the lender. |
Summary
Miss O purchased Fractional Club timeshare membership in May 2014, financing £13,549 with a £17,327 loan from Shawbrook Bank at 19% APR over 15 years. She declared a gross annual income of £45,000 as a self-employed business owner. The lender approved the application based on automated credit scoring, the application form, and credit reference agency data without further verification. However, bank statements and business financial records later revealed Miss O's actual income was approximately £12,000-£13,727 annually. The ombudsman found the lender should have identified increased risk from the loan's size, term, and the borrower's self-employment status, and should have requested verification documents. With accurate income information, the lender would have declined the application as Miss O could not sustainably repay the loan given her existing credit commitments. The complaint was upheld and the lender was directed to refund all repayments, cancel the debt, refund associated charges, and remove adverse credit file information.
The Ombudsman's reasoning
The ombudsman found that while the lender was entitled to expect Miss O to complete the application in good faith, this did not negate its obligation to undertake reasonable and proportionate checks. The combination of a substantial long-term loan (£17,327 over 15 years), a high interest rate (19%), and self-employment status created increased risk that should have triggered further verification. The lender should have obtained business financial statements and/or bank statements to verify income. Had it done so, it would have discovered Miss O's actual income was approximately £12,000-£13,727 annually, not £45,000. With this accurate income figure and existing credit commitments of £962 per month, the lender would have recognised that Miss O could not sustainably repay the loan. The fact that Miss O maintained repayments for a few years does not demonstrate affordability, particularly given the travel savings bonus covered the net increase for the first 10 months and she requested reduced repayments as soon as that bonus ended.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Shawbrook Bank Limited, all decisions | 2,486 | 17% |
Source
Read the original decision on the Financial Ombudsman Service website