Upheld: incorrect application of settlement payment and poor complaint handling complaint against Salary Finance Limited

Decision detail

Summary

Mrs B took out a loan with SFL and requested a settlement figure of £810.22 in July 2025. She paid this amount on 13 August 2025 but used an incorrect reference number, causing SFL to initially apply it to a previous loan account. Although SFL later identified the payment was intended for the active loan, they had already issued a partial refund and reconstructed the account, resulting in a claimed outstanding balance of £234. The ombudsman found that Mrs B's payment clearly matched the settlement figure and was made within the correct timeframe, and that SFL should have identified this and applied the payment correctly once Mrs B contacted them. The ombudsman upheld the complaint and ordered SFL to write off the remaining balance and amend Mrs B's credit file to reflect full settlement in August 2025.

The Ombudsman's reasoning

The ombudsman found that Mrs B's payment of £810.22 was clearly intended to settle her active loan, as it matched exactly the settlement figure provided by SFL and was paid within the relevant timeframe. While SFL was initially reasonable in relying on the incorrect reference number to allocate the payment, once Mrs B contacted them to explain the situation, SFL should have identified the purpose of the payment and ensured it was applied correctly to the active loan. Instead, SFL processed the payment through automated systems, issued a partial refund, and reconstructed the account without fully recognizing or correcting the underlying issue. The ombudsman rejected SFL's reliance on the outstanding balance from the earlier loan account, noting that SFL had previously confirmed to Mrs B that this loan was closed and had not pursued the balance for a significant period. The ombudsman concluded that while Mrs B had not technically repaid the full contractual amount, the shortfall was primarily caused by SFL's mishandling of the payment and their failure to take appropriate corrective action once the issue was identified. The ombudsman also noted that SFL did not clearly explain what had happened to Mrs B or give her a fair opportunity to resolve the position. Firms are responsible for ensuring their systems produce fair outcomes, particularly once issues are brought to their attention, and SFL failed to do this.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website