Ivanna made a complaint to us after she applied to her bank for three loans but found it difficult to repay these due to her gambling addiction.
Over several years, Ivanna applied to her bank for five loans totalling £15,000, and three overdraft limit increases in quick succession. When she found it was difficult to repay what she had borrowed, she made a complaint to her bank that the lending had been unaffordable. She told the bank she had a gambling addiction and said if it had been a responsible lender it would have realised she was getting deeper into debt, and had been using the money borrowed to feed her addiction.
The bank said it was sympathetic to Ivanna’s difficult financial situation, but it didn’t think it had done anything wrong in lending to her. It was unable to provide the exact information it had looked at before approving Ivanna’s requests for credit, but said it would have considered her income for each request along with using credit scoring and credit reference agency data, and her historic account data. It also said Ivanna had only just made it aware of the problem she had with gambling.
Ivanna didn’t think the bank had treated her fairly, so asked us to look into her complaint.
What we said
Ivanna’s bank statements from the time she applied for the initial overdraft showed she had been overdrawn by around £800 but had a weekly income of £350. We could see early indications that she was primarily using her account for gambling too. By the time Ivanna applied for the second limit increase the following month, there was much more evidence she had started relying on credit to fund gambling, including spending almost up to the limit. More than once she won several thousand pounds from gambling but spent it all within a matter of days.
We felt the bank could reasonably assume Ivanna would use the initial overdraft to temporarily help balance her finances. Although there were some signs of gambling, we didn’t think this would have raised concerns with the bank that Ivanna had a gambling addiction.
However, when Ivanna later applied for the second limit increase, the bank would have seen Ivanna was unable to sustain repayments on her overdraft based on her continued high-volume of gambling transactions. And the bank would have seen that this meant she went over the overdraft limit multiple times, incurring additional fees and charges. So, we felt it should not have granted the second or third limit increases.
We then looked at the bank’s decision to approve five loans. We noted the bank would have had access to information which showed multiple occasions where Ivanna had gone over her overdraft limits in the past, mostly due to her gambling addiction, and this was spending behaviour that continued with each successive loan Ivanna was given. The impact this had can be seen as early as the first loan – Ivanna’s direct debit repayments on this were returned unpaid several times – and we felt this should have alerted the bank that Ivanna was struggling to meet this commitment. By the time of the fifth loan application, Ivanna’s current account again showed signs of excessive and uncontrollable gambling.
Taking all this into account, we said the bank had continued to irresponsibly lend to Ivanna when there were clear signs of gambling-related harm. The bank would have seen this had they carried out sufficient checks.
To put things right, we told the bank to rework Ivanna’s account balance to remove all interest, fees and charges applied from the time of the second overdraft limit increase to the point at which Ivanna told us her gambling was under control. We also said all adverse entries on Ivanna’s credit file from that period should be removed, and that the interest, charges and capital amounts on the loans should be refunded to her. We said that the bank should’ve been aware that the funds from the loans would’ve been used for gambling and that the outcome of this lending would be increased indebtedness for a customer already struggling to manage their finances properly. Because the harm that would be caused to Ivanna was foreseeable in this way and significant, we said the bank needed to refund this money in order to put Ivanna back in the position she would’ve been in had they not provided the means for her to continue gambling in a problematic way.
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