irresponsible lending + unsecured personal loan

lex2013

A few months ago I took a small unsecured personal loan (10k) over the internet with HSBC. The application was fast and the money was in my account strain away. I used the money to invest in my business.

HSBC never asked for the exact reason for the loan. On the drop down box requesting information I just selected the “other” option, as “business investment” was not listed.
Now several months later my business has gone bankrupt and I work for someone else and earn significantly less, making it hard for me to pay back the loan.

I have never missed a payment and have good credit history. I spoke with HSBC and tried to increase the term of the loan (to reduce monthly payments) but the application was unsuccessful. Other lenders that I have contacted are not willing to allow me to consolidate my existing credit because I have reached my debt limit. Over the last few months I have gone deep into my overdraft making it hard for me to manage my finance.

Can I accuse HSBC of irresponsible lending because they never requested additional details for the loan purpose?

Any other suggestions? :j :beer:

jacques_chirac

Assuming you have mental capacity, there does not appear to be anything irresponsible in what they did. If you try to use that argument with them I would expect them to come back and suggest you were irresponsible - £10,000 is a lot to lose in 'several months'.

Give them a call and tell them you are unable to meet the full payments. Offer to send them a statement of your income and expenditure, and they will negotiate a repayment plan with you. This will trash your credit rating, but appears to be the only option you have.

Caladan

jacques pretty much covers this. How can you suggest the bank was irresponsible when they didn't advise you to take the loan in the first place? If it was affordable based on your current circumstances (and that in itself is based on the information you provide) then surely the fact you borrowed the money and used it for something that proved to be an unwise investment is entirely out of the banks control?

I do sympathise with your situation though - running a business yourself is a great thing and it's easy to get rose-tinted views of success. Your best bet if you really can't afford the repayments is probably to discuss the situation with the banks distressed lending/financial difficulty teams and see if they can re-schedule the loan that way.

Downside to taking this approach is it can have some impact on your credit history and standing with the bank.

Edit: To explain my point further - Whilst a bank may decline a loan if it knows the purpose for it is dubious (such as investing the money to finance a professional poker player) it's assessment of loan applications is based on affordability to repay - Not use of the funds. I've seen FOS complaints rejected with similar circumstances for this very reason.

antrobus

lex2013 wrote: »

....Can I accuse HSBC of irresponsible lending because they never requested additional details for the loan purpose? ....

Well you could, I'm not sure it would get you anywhere though.

The Office of Fair Trading has taken the view since March 2010 in its ‘Irresponsible Lending – OFT Guidance for Creditors’ that a bank should: “make a reasonable assessment of whether a borrower can afford to meet the repayments in a sustainable manner” and that: “borrowers should not be targeted with credit products that are clearly unsuitable for them”.


But in those cases, the only sanction – if the offence is great enough – is for the OFT to remove the bank’s licence to give credit and/or a fine of up to £50,000. There is no remedy for the individual customer. In particular, the OFT does not have the power to revoke the credit agreement.

The Financial Ombudsman Service (FOS) does have that power, but its power is entirely discretionary. By law, the bank needs to establish the customer’s financial position before making a loan, but it is only under FSA guidelines that they need to assess the customer’s ability to meet their potential repayments. So long as the product is not grossly ludicrous for the customer’s needs and the bank can show that no advice was given and the credit scoring assessment was undertaken, the FOS is unlikely to make a finding against the bank.


http://www.proneg.co.uk/news-articles/irresponsible-bank-lending-negligent.html

lynz68

As you took out a "personal loan" "business investment" was never going to appear as reason for taking the loan. I am assuming a business loan was never an option and that it may have been in trouble already when you took the loan.

The bank could argue you applied for the loan fraudulently in these circumstances.

£10,000 is really not a small loan.

opinions4u

Did you tell them you were self-employed?

somethingcorporate

No, just no.

Irresponsible borrowing perhaps?

matttye

Your post is well written and it makes sense. This leads me to believe you have all your faculties. Even if you didn't, as you applied online there would be no way of the bank knowing that.

It's therefore difficult to see on what basis they could be considered irresponsible, bearing in mind they only lent to you based on the affordability information you provided to them.

John1993_2

lex2013 wrote: »

Can I accuse HSBC of irresponsible lending because they never requested additional details for the loan purpose?

No, of course you can't. You asked for a loan, were offered one on a certain set of terms, and you accepted it.

Why on earth would you think that HSBC would anticipate that you accepted a deal that you could not handle?

Ok, to be more accurate, you can accuse them of anything you want, including genocide, but all that they are guilty of is treating you like a responsible adult. It turns out that this was poor judgement on their part, but that is not a basis for you not to pay back what you owe.

I really hope that you are trolling. If you are serious, then I fear for your future.

gb12345

opinions4u wrote: »

Of course.

I'm offering odds:

1/3 troll
4/7 no further posts by the OP
9/2 further relevant information
66/1 a credible post confirming there's a legal way to get out of the debt without knackering the credit file

I'll offer evens that the OP will return, have a strop at all the nasty replies and accuse everyone of working for HSBC.

Deadbeat

A few months ago I took a small unsecured personal loan (10k) over the internet with HSBC. The application was fast and the money was in my account strain away. I used the money to invest in my business.

HSBC might not be happy about you borrowing money ostensibly for personal spending and using for business investment instead. The two things have very different risk profiles which is why banks usually have different lending criteria and processes in place for each.

They might even accuse you of materially misrepresenting the purpose for the borrowing, which would make any legal claim of yours against them much more difficult.