Partially upheld: irresponsible lending and unfair account termination/default reporting complaint against Next Retail Limited

Decision detail

Summary

Mrs M complained that Next irresponsibly provided her with a catalogue shopping account and six credit limit increases between May 2015 and December 2021, resulting in unaffordable credit and worsening financial position. She also complained about Next defaulting her account in November 2023 after she entered a debt management plan in July 2022. The ombudsman found that while Next did not conduct sufficiently thorough affordability checks before offering limit increases, the available evidence did not demonstrate the credit would have been unaffordable at the time, so the lending decisions were not upheld. However, the ombudsman partially upheld the complaint regarding the default, finding that Next should have defaulted the account from January 2023 (when arrears exceeded three monthly payments) rather than November 2023, and directed Next to backdate the default accordingly.

The Ombudsman's reasoning

The ombudsman found that while Next did not carry out sufficiently thorough checks before offering credit limit increases, the available evidence (including Mrs M's bank statements) did not clearly demonstrate that the repayments would have been unaffordable at the time the limits were offered. Therefore, the lending decisions were not found to be unfair. However, regarding the default, the ombudsman determined that once Mrs M was paying less than 50% of the minimum payment through the DMP from July 2022, there was no reasonable prospect of her bringing the account up to date within a reasonable period. By January 2023, Mrs M was effectively more than three monthly payments in arrears, which is the typical point when a firm should consider defaulting an account. Therefore, the default should have been applied from January 2023, not November 2023.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website