Josephine came to us after a loan company lent to her, but she struggled to pay it back. She felt the company had been irresponsible because their checks should have shown that she was a vulnerable customer and would have difficulty paying the loan back.
Josephine complained that a loan company lent to her irresponsibly. Josephine has several mental health conditions and said she didn’t remember taking out the loan, or spending the money, due to medication she was taking at the time.
Josephine was on a very low income, made up of benefits, when the application was made – which wasn’t enough to keep up repayments on the loan. She struggled for several months to make payments, leaving her in significant arrears.
Josephine provided evidence to the loan company from her doctor and her hospital, confirming that she suffered from several conditions which made her extremely vulnerable. This confirmed that the medication she was taking at the time the loan was taken out would have impaired her ability to make sound financial decisions. Josephine also mentioned that she had been in an accident and was still recovering from her injuries.
The loan company said the credit scoring they completed suggested that the loan was likely to be affordable for Josephine. They also said Josephine had signed the credit agreement and confirmed that she understood the agreement and could afford the repayments.
As the loan company thought they hadn’t done anything wrong they said they would start court proceedings to recover the outstanding debt.
What we said
We didn’t think the loan company had carried out enough checks before granting the loan to Josephine.
We thought that if the loan company had done more checks, including a proportionate assessment of her income and expenditure, it would have known that the loan wouldn’t be affordable or sustainable for Josephine.
We asked the loan provider to refund all of the interest and charges that Josephine had paid. When these were refunded it cleared the outstanding debt.
We thought that being asked to make payments that were clearly unaffordable for her caused considerable stress, particularly given her mental health conditions and her financial circumstances at the time. Medical evidence also showed that her condition had got worse following her calls with the loan company, and that she had needed extra counselling for a number of weeks on top of what she was already receiving.
We also considered whether the loan company had tried to help Josephine once they were aware of her situation. We didn’t think the loan company had sufficiently taken account of Josephine’s circumstances when starting court proceedings, given what they knew about her health. All of this caused her anxiety about ending up in court.
Taking all of that into account, we said that the loan company should also pay Josephine £800 in compensation for the substantial worry and distress caused by the irresponsible lending decision and for the way it handled things after Josephine got into arrears.
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