Not upheld: Irresponsible lending complaint against National Westminster Bank Public Limited Company (formerly Sainsbury's Bank)

Decision detail

Summary

Mrs B complained that Sainsbury's Bank lent to her irresponsibly by failing to make adequate affordability checks before issuing a credit card with a £4,500 limit in November 2020. Mrs B had existing unsecured debt of £25,600 and a debt-to-income ratio of 0.57. The ombudsman agreed that Sainsbury's Bank's checks were not reasonable and proportionate, as they did not verify income, failed to clarify the additional household income, and relied heavily on modelled expenditure data. However, when the ombudsman reconstructed what proper checks would have revealed using Mrs B's actual bank statements, they showed average monthly income of £2,354 and outgoings of £1,851, leaving sufficient disposable income of over £500 monthly to support sustainable repayments. Consequently, the complaint was not upheld as the lending decision was ultimately fair.

The Ombudsman's reasoning

The ombudsman agreed with the investigator that Sainsbury's Bank's checks were not reasonable and proportionate because income was not verified, combined household income was used without clarification, and there was heavy reliance on modelled data rather than actual expenditure. However, when proper checks were reconstructed using contemporaneous bank statements, they revealed average monthly income of £2,354 and outgoings of £1,851, leaving disposable income of over £500 monthly. This was sufficient to support sustainable repayments on a four-year credit card repayment, meaning the lending decision was ultimately fair despite the inadequate initial checks.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website