Not upheld: irresponsible lending / arrears mishandling and incorrect information about capitalisation options complaint against Clydesdale Bank Plc trading as Virgin Money

Decision detail

Summary

Mr V complained that Virgin Money told him arrears could be capitalised if he maintained a six-month payment arrangement, but then refused to do so citing the interest-only nature of the mortgage. While the ombudsman found Virgin Money should have considered capitalising arrears on a repayment basis, the complaint was not upheld because Mr V could not have afforded the additional £90 monthly cost in July 2025. Bank statements showed average monthly outgoings exceeding income, and Mr V's subsequent reduction of payments by over £140/month and statements about financial hardship evidenced unaffordability. The ombudsman also rejected Mr V's complaint about credit reporting, finding Virgin Money had accurately reported the arrears as required.

The Ombudsman's reasoning

The ombudsman found that while Virgin Money should have considered capitalising arrears on a repayment basis rather than simply refusing based on the interest-only nature of the mortgage, Mr V could not have afforded this option in July 2025. The ombudsman noted that Mr V's stated disposable income of £550 was inconsistent with token payments to other creditors, indicating unreliable information. The bank statements Mr V later provided showed average monthly outgoings exceeding income, and when the mortgage payment was added, affordability was not demonstrated. Additionally, Mr V's own actions after the six-month period (reducing payments by over £140 per month) and his statements about struggling financially and restricting food choices evidenced that he could not afford the additional £90 monthly cost. The ombudsman concluded that consolidating arrears would have worsened Mr V's financial situation, which the FOS would not do to a consumer. Regarding credit reporting, the ombudsman found Virgin Money had accurately reported the arrears to CRAs as required.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website