Not upheld: irresponsible lending and unaffordable credit limit increases complaint against Clydesdale Bank Plc trading as Virgin Money

Decision detail

Summary

Mrs M complained that Virgin Money irresponsibly provided her with an unaffordable credit card and two credit limit increases (from £4,900 to £9,800 in March 2021, then to £12,800 in September 2022). Mrs M argued that proportionate affordability checks would have identified these limits as unaffordable given her income and existing commitments. The ombudsman found that while Virgin Money failed to evidence its income and expenditure checks for the increases, a reconstruction based on Mrs M's bank statements showed she had reasonable disposable income after accounting for household expenditure shared with a joint account holder and her existing credit commitments. Using regulatory guidance on reasonable repayment periods for revolving credit, the ombudsman concluded the limits would have appeared affordable. The complaint was not upheld, and no remedy was ordered.

The Ombudsman's reasoning

The ombudsman applied the regulatory requirement for proportionate creditworthiness assessments and sustainable repayment within a reasonable period. For the original lending, Virgin Money's checks were found proportionate based on the information obtained and validated. For the credit limit increases, although Virgin Money failed to evidence its income and expenditure checks, the ombudsman reconstructed what proportionate checks would have shown by reviewing Mrs M's bank statements. The ombudsman found that Mrs M had sufficient disposable income after accounting for her regular household expenditure transferred to the joint account and her existing credit commitments. Using the regulatory guidance that reasonable repayment periods should be based on typical personal loan terms (approximately five years for the credit limits provided), the ombudsman concluded the limits would have appeared affordable. The ombudsman rejected Mrs M's argument that her high credit utilisation and minimum payments should have caused concern, noting she made significant payments exceeding minimums and her utilisation remained below 52%. The ombudsman also rejected arguments about new credit being obtained, finding that lenders are entitled to rely on credit check information unless aware of contradictory information, and that new lending takes time to be reported to credit reference agencies.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website