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

Decision detail

Summary

Miss B complained that MBNA irresponsibly lent to her by providing a credit card with a £4,600.00 limit without appropriate affordability checks, citing her existing debts at the time. MBNA had obtained information on Miss B's income (just under £46,000.00 per year) and carried out a credit search showing no recent repayment difficulties, though existing credit card debts were evident. The ombudsman found the checks proportionate for the early stage of lending and noted that Miss B had applied for the card specifically to transfer existing balances at 0% interest, which would reduce her overall indebtedness and interest payments. The complaint was not upheld as MBNA had no reason to believe Miss B could not afford the credit or that her financial situation would worsen.

The Ombudsman's reasoning

The ombudsman found that MBNA's checks were proportionate for the early stage of a lending relationship. The credit limit of £4,600.00 was reasonable based on Miss B's declared income of just under £46,000.00 per year and monthly expenses of around £600. Critically, the ombudsman noted that Miss B's application for the 0% balance transfer card indicated she intended to consolidate existing debt at a lower interest rate, which would reduce her overall indebtedness rather than increase it. The ombudsman rejected the argument that existing debts alone should have prevented lending, as the balance transfer facility would allow Miss B to pay less interest and make greater inroads into her capital. The ombudsman also noted that MBNA could not control whether Miss B closed other accounts or reaccumulated balances on cleared accounts.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website