Not upheld: Irresponsible lending complaint against Shop Direct Finance Company Limited

Decision detail

Summary

Mr L complained that Shop Direct irresponsibly provided him with a Very branded catalogue shopping account in May 2017 with credit limit increases in February and May 2018, despite his previous defaulted Littlewoods account (also owned by Shop Direct) still having outstanding debt. The ombudsman found that Shop Direct's lending decisions were fair and reasonable based on Mr L's demonstrated income of approximately £1,300 monthly plus additional ad-hoc credits, his management of existing credit, and proportionate checks at the time. The ombudsman rejected the argument that Shop Direct should have refused lending due to the previous Littlewoods default, noting the debt had been sold nearly 20 years prior. The complaint was not upheld and no remedy was ordered.

The Ombudsman's reasoning

The ombudsman found that Shop Direct's checks at account opening were proportionate and led to a fair lending decision. While the checks before the February and May 2018 limit increases were not proportionate (lacking updated income and expenditure information), the ombudsman reviewed Mr L's bank statements to determine what proportionate checks would likely have shown. Based on Mr L's salary of approximately £1,300 monthly plus ad-hoc credits totalling over £3,500, informal household commitments unlikely to be identifiable through online checks, and evidence that he was managing existing credit well and making payments in excess of minimums, the ombudsman concluded proportionate checks would have led Shop Direct to conclude the credit limits were affordable. Regarding the Littlewoods default, the ombudsman found it was not unfair for Shop Direct to provide further lending nearly 20 years after the previous account was sold to a debt purchaser, particularly as the credit checks reported overall outstanding debt without breaking down which businesses held liabilities.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website