Not upheld: unfair treatment of customer in financial difficulty; continuation of interest and charges during Debt Management Plan complaint against Chetwood Financial Limited trading as Better Borrow

Decision detail

Summary

Miss C complained that Better Borrow continued to apply fees and interest totalling around £684 after accepting her Debt Management Plan payments of approximately £172 per month in summer 2023. Better Borrow argued it had no legal obligation to freeze interest and continued charging in line with the loan terms. The ombudsman found that while lenders are not obliged to freeze interest in such circumstances, they must show forbearance to customers in financial difficulty. The ombudsman concluded that Better Borrow showed forbearance by accepting the reduced repayment plan and had made reasonable attempts to contact Miss C directly. As Better Borrow lacked detailed information about Miss C's circumstances and vulnerabilities at the time the DMP was agreed, and the reduced payments still exceeded the interest being added, the ombudsman found Better Borrow had treated Miss C fairly and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman found that while lenders are not legally obliged to freeze interest when a customer enters a Debt Management Plan, they do have a duty to show forbearance and treat customers in financial difficulty fairly. The ombudsman considered that forbearance can take various forms, not just freezing interest. In this case, Better Borrow showed forbearance by accepting the reduced repayment plan. The ombudsman found that Better Borrow had made reasonable attempts to contact Miss C directly and that the debt advice provider had not provided sufficient contextual information about Miss C's circumstances to justify immediately freezing interest. The ombudsman noted that the reduced payments exceeded the interest being added, so Miss C was still reducing the capital. Additionally, the interest was only applied for approximately four months before the account defaulted, and Better Borrow was not aware of Miss C's vulnerabilities or long-term financial difficulties at the time the DMP was agreed.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website