Alex asked for our help with a complaint after a lender irresponsibly sold him a guarantor loan, whilst he also had several other debts with other lenders. On top of this, he was also gambling heavily, spending beyond his financial means.
What happened
Alex asked for our help with a complaint saying a lender irresponsibly sold him a guarantor loan. At the time he took out the loan, Alex also had debts with other lenders and owed money to a work colleague. On top of this he was also gambling heavily, spending beyond his means.
The lender disagreed that it had lent irresponsibly to him. It explained that it had carried out a thorough affordability assessment and it had relied on the information Alex provided about his income and expenditure at the time. The lender said Alex’s income meant he was in a position to comfortably repay the loan, which was why it had approved it.
Unhappy with the lender’s response, Alex asked us to look into things.
What we said
To determine whether the loan was affordable, we looked at the level of affordability checks carried out by the lender before offering the loan, and asked Alex for a copy of his credit file and bank statements.
Before offering the loan, the lender had asked for details of Alex’s income and expenditure and had obtained a copy of his credit report. Although Alex’s income looked at in isolation suggested he would have been able to afford the monthly payments, his credit file showed that he already had several other forms of credit in his name. When we looked more closely, we saw several accounts on his credit file were already in arrears, including a mortgage, suggesting he was in a lot of financial difficulty at the time. We therefore felt the lender should have carried out further checks to see whether Alex was in a position to repay the loan it offered.
We said it would have been a proportionate check if the lender verified Alex’s expenditure due to the adverse information on his credit file. One way it could have done this would have been to request copies of Alex’s bank statements. At the time, Alex had several bank accounts, one of which appeared to be for repaying a debt to a work colleague, with the other used mainly for gambling. The statements showed Alex was spending a large amount each month on online gambling sites, including online casinos, which was not sustainable considering his income and other debts.
Overall, we thought that had the lender carried out proportionate checks they would have likely seen the extent of Alex’s gambling. We therefore said they didn’t lend responsibly and asked them to refund any interest and charges on the loan, plus interest.