Partially upheld: irresponsible lending - inadequate affordability checks complaint against Gain Credit LLC trading as Lending Stream

Decision detail

Summary

Mr H complained that Lending Stream provided 8 loans without conducting sufficient affordability checks. The ombudsman upheld the complaint in part for loan 5 only. While loans 1-4 involved proportionate checks for early-stage lending, by loan 5 (the fifth loan in the chain with loan 1 still outstanding and taken 12 days after loan 4), Lending Stream should have verified Mr H's actual income and expenditure. Bank statements revealed Mr H spent 50% of his income on gambling in the month before approval, making the loan unaffordable. Loans 6-8 were treated as a new lending chain after a 7-month break, and proportionate checks showed affordability. Lending Stream must refund interest, fees and charges on loan 5 plus 8% interest, offset against remaining capital, and remove adverse credit file information.

The Ombudsman's reasoning

By loan 5, proportionate checks required verification of Mr H's actual income and expenditure given that this was the fifth loan in the chain, loan 1 remained outstanding, and Mr H was borrowing again within 12 days of repaying the previous loan. While Lending Stream's initial checks appeared reasonable, they failed to verify the information provided. Bank statements would have revealed that Mr H was spending 50% of his income on gambling transactions before any other costs were considered, demonstrating the loan was unaffordable and unsustainable. For loans 6-8, the 7-month break constituted a new lending chain, and proportionate checks for a new customer were satisfied by Lending Stream's standard verification procedures, which showed affordability. Although Mr H faced vulnerability during this period, Lending Stream could not have known about this without Mr H disclosing it.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website