Customers who use high-cost short-term credit or doorstep loans may find that they repeatedly go back to the same lender, time and time again, until they have taken out not just one, but possibly 5, 10 or even 50 loans – just with that same lender.
Sometimes, when lenders receive an Unaffordable Lending claim against them, they might ask the customer what ‘evidence’ they have that the loans were unaffordable. Well, there are many situations where the loans themselves are the evidence of irresponsible lending. In other words, the fact that someone has taken out so many expensive loans in a row shows that they cannot afford them – as no one wants to take out these loans unless they feel they really have to. Lenders should be considering the overall pattern of borrowing to establish if repeatedly providing loans has become unsustainable and harmful to the customer.
There are numerous legally-binding outcomes which address the harmful practice of repeat lending, instructing lenders to compensate their customers.
This decision upheld loans 6 to 15:
‘In addition to assessing the circumstances behind each individual loan provided to Mrs H by Skyline, I also think it’s fair and reasonable to look at the overall pattern of lending and what unfolded during the course of Mrs H’s lending history with Skyline. This is because, there may come a point where the lending history and pattern of lending itself demonstrates that the lending was unsustainable.
Looking at the relevant rules and guidance as summarised in the earlier part of my decision, Skyline was required to establish whether Mrs H could sustainably repay her loans – not just whether the loan payments were affordable on a strict pounds and pence calculation.’
(https://www.financial-ombudsman.org.uk/decision/DRN-1840716.pdf)
This is another decision where loan 6 was deemed to be the point at which a harmful pattern of repeat lending had been established:
‘So, the harmful pattern I think was established from loan 6 continued. Mrs F had paid large amounts of interest to, in effect, service a debt to Mutual over a very long time.
I think that Mrs F lost out because Mutual continued to provide borrowing from loan 6 onwards because:
- these loans had the effect of unfairly prolonging Mrs F’s indebtedness by allowing her to take expensive credit over an extended period of time.
- the length of time over which Mrs F borrowed was likely to have had negative implications on Mrs F’s ability to access mainstream credit and so kept her in the market for these high-cost loans.’
(https://www.financial-ombudsman.org.uk/decision/DRN-3023277.pdf)
Repeat lending is not just about the number of loans, it is also about the length of time that the customer has been continuously owing the lender money. As such, the following decision upheld from loan 4, because the customer had already been in the lending relationship for over a year and a half:
‘I’ve looked at the overall pattern of Morses’ lending history with Ms W, with a view to seeing if there was a point at which Morses should reasonably have seen that further lending was unsustainable, or otherwise harmful. And so Morses should have realised that it shouldn’t have provided any further loans.
Given the circumstances of Ms W’s case, I think that this point was reached by loan 4. I say this because:
- At this point she had been indebted to Morses for around 19 months.’
(https://www.financial-ombudsman.org.uk/decision/DRN-3797798.pdf)
If your claim is upheld due to a harmful pattern of repeat lending, you can expect to get your interest and charges refunded, and the loans removed from your credit file.
‘So I’m upholding this complaint in respect of loans 5 – 14. LS repeatedly lent to Mr B in an unsustainable manner…’
‘the number of loans taken from loan 5 onwards means any information recorded about them is adverse. So all entries about loans 5 – 14 should be completely removed from Mr B’s credit file.’
(https://www.financial-ombudsman.org.uk/decision/DRN-1933102.pdf)