Not upheld: irresponsible lending - insufficient affordability checks complaint against Clydesdale Bank Plc trading as Virgin Money

Decision detail

Summary

Mrs M complained that Virgin Money lent to her irresponsibly by failing to make sufficient affordability checks before granting a credit card with an £8,500 limit in August 2014, given her declared low income of £35,500 annually. An investigator found the checks were not reasonable and proportionate and calculated negative disposable income of -£400 monthly. The ombudsman disagreed with the investigator's methodology, recalculating disposable income as approximately +£600 monthly when excluding discretionary spending, and noted account closing balances of £1,800-£3,500. Although finding the checks were not reasonable and proportionate, the ombudsman concluded the lending decision was fair based on Mrs M's actual financial position at the time and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman found that while Virgin Money's affordability checks were not reasonable and proportionate due to incomplete documentation, the lending decision was nonetheless fair. By analysing Mrs M's actual current account records and excluding discretionary spending, the ombudsman calculated positive disposable income of approximately £600 per month, sufficient to support sustainable repayments. The account closing balances of £1,800-£3,500 and existence of savings further supported affordability. The ombudsman rejected the investigator's methodology of including all expenditure without distinguishing between necessary and discretionary spending.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website