Think loan provided to me may be classed as unaffordable

ThunderHoof

So Everyday Loans disagreed and an Ombudsman made a final decision.

My findings

I’ve considered all the available evidence and arguments to decide what’s fair and

reasonable in the circumstances of this complaint.

Having carefully considered everything, I’ve decided to uphold Mr S’ complaint. I’ll explain

why in a little more detail.

We’ve explained how we handle complaints about unaffordable and irresponsible lending on

our website. And I’ve used this approach to help me decide Mr S’ complaint. Having carefully

considered everything I’ve decided to uphold Mr S’ complaint. I’ll explain why in a little more

detail.

Everyday Loans needed to make sure it didn’t lend irresponsibly. In practice, what this

means is Everyday Loans needed to carry out proportionate checks to be able to understand

whether Mr S could afford to repay any credit it provided.

Our website sets out what we typically think about when deciding whether a lender’s checks

were proportionate. Generally, we think it’s reasonable for a lender’s checks to be less

thorough – in terms of how much information it gathers and what it does to verify it – in the

early stages of a lending relationship.

But we might think it needed to do more if, for example, a borrower’s income was low or the

amount lent was high. And the longer the lending relationship goes on, the greater the risk of

it becoming unsustainable and the borrower experiencing financial difficulty. So we’d expect

a lender to be able to show that it didn’t continue to lend to a customer irresponsibly.

The information Everyday Loans has provided suggested that it carried out credit checks

before it lent to Mr S. The results of which showed that Mr S already had a significant

amount of existing debt with credit card providers. Furthermore, the bank statements

Everyday Loans obtained showed that Mr S was regularly overdrawn and that he even had

returned direct debits.

And while there’s some suggestion this loan might have been for debt consolidation, the

amount didn’t correspond to what Mr S owed. It’s therefore unclear to me how or what was

going to be consolidated and more crucially how this was going to improve Mr S’ overall

financial position- especially as this loan had a far higher interest rate than Mr S’ credit

cards. I’m also mindful that the income and expenditure assessment Everyday Loans carried

out showed that the payment for this loan would take up pretty much all of Mr S’ monthly

disposable income.

All of this leaves me persuaded by what Mr S has said about already being in a difficult

financial position at the time. And while it’s possible Mr S’ difficulties reflected his choices

rather than financial difficulty, I’d add that my experience of these types of cases suggest

this is unlikely, in the absence of any reasonable or plausible arguments from Everyday

Loans, I’ve been persuaded to accept Mr S’ version of events here.

As this is the case, I do think that Mr S’ existing financial position meant that he was unlikely

to be able to afford the payments to this loan, without undue difficulty or borrowing further.

And I’m satisfied that reasonable and proportionate checks would more like than not have

shown Everyday Loans that it shouldn’t have provided this loan to Mr S. As Everyday Loans

provided Mr S with this loan, notwithstanding this, I’m satisfied it failed to act fairly and

reasonably towards him.

Mr S ended up paying (and is being expected to pay) interest, fees and charges on a loan he

shouldn’t have been provided with. So I’m satisfied that Mr S lost out because of what

Everyday Loans did wrong and that it should put things right.

Fair compensation – what Everyday Loans needs to do to put things right for Mr S

Having thought about everything, Everyday Loans should put things right for Mr S by:

 removing all interest, fees and charges applied to this loan from the outset. The

payments Mr S made should be deducted from the new starting balance – the

£3,500.00 originally lent. If Mr S has already repaid more than £3,500.00 then

Everyday Loans should treat any extra as overpayments. And any overpayments

should be refunded to Mr S;

 adding interest at 8% per year simple on any refunded payments, if there are any,

from the date they were made by Mr S to the date of settlement†;

 if after all adjustments have been made, no outstanding balance remains, Everyday

Loans should remove all adverse information it recorded on Mr S’ credit file as a

result of this loan; OR if an outstanding balance does remain after all adjustments

have been made Everyday Loans should contact Mr S to arrange a suitable and

affordable repayment plan for the outstanding amount.

My final decision

For the reasons I’ve explained, I’m upholding Mr S’ complaint. Everyday Lending Limited

should put things right in the way I’ve set out above.