The Unaffordable Lending Claim Specialists

Many people are still unaware that there are rules in place for businesses in the UK to lend money responsibly. Many of these rules are set out in the Consumer Credit Sourcebook (“CONC”) section of the Financial Conduct Authority’s Handbook.

Even if you knew exactly what you were doing by approaching a lender to borrow money, and you wanted and needed the money, the rules mean that lenders should still be carrying out affordability checks. And if the lender did not do its job properly, you could be entitled to get the interest charges you paid on the borrowing, refunded back to you.

There are many different lenders and products in the UK – ranging from loans to credit cards. Affordability checks should be proportionate and so will vary in how thorough the background checks need to be. The type of affordability checks the lender needed to do will depend on various factors, including the amount of money being borrowed, over what length of time, and whether you were already a known customer of the lender (with a history of previously borrowing with them). Essentially though, the lender should be checking to establish that you can sustainably repay everything you owe over a reasonable period of time or the entire term of the credit agreement. Repaying sustainably means that it should not cause you too much difficulty to pay month after month from your income or savings. And it certainly wouldn’t be right if you had to borrow even more money just to afford the repayments on your existing borrowing.

We find that many lenders do not carry out the affordability checks they should have done. Or, whilst proportionate checks were carried out, the lender chose to overlook information which ought to have meant they declined the lending. For example, this might be because someone was already in severe financial difficulty before the lending decision was even made – so the lender ought to have known that any additional borrowing was simply not going to be sustainable. We’ve also seen examples of lenders repeatedly lending to the same customer time and time again – when the lender ought to have known that a harmful pattern of repeat borrowing – and persistent reliance on credit – had emerged.

In one of many upheld claims of this type, an Ombudsman commented:

In my view, if Payday Express had seen all of this – as I think it would’ve done if it carried out proportionate checks – it would’ve realised Mr S was in no sort of position to be able to make the payments he was being asked to make from his income – he simply didn’t have the disposable income to be able to do so. So I think proportionate checks here would’ve shown Payday Express Mr S wasn’t in any sort of position to repay these loans. This means I think that not only did Payday Express fail to carry out proportionate checks before giving Mr S thesoans, but Mr S also lost out because of this