Danesmead Investment Limited · DRN-2884376

The complaint Miss M says Danesmead Investment Limited irresponsibly lent to her. What happened Miss M was lent a logbook loan by Danesmead in July 2008, the loan was for £2,000 with a term of 18 months and monthly repayments of around £309. I understand the loan was repaid in January 2010. Our adjudicator upheld Miss M’s complaint and thought the loan shouldn’t have been lent to Miss M. Danesmead disagreed, in summary it says it carried out sufficient checks and the checks showed that Miss M could afford the loan. It also says it won’t have lent to Miss M if its checks showed she couldn’t afford it. Danesmead has also said this complaint isn’t one that our service could look into as it wasn’t regulated by the Financial Conduct Authority (FCA) when it lent. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. We’ve set out our general approach to complaints about short-term lending - including all of the relevant rules, guidance and good industry practice - on our website. Firstly, in relation to Danesmead’s continued point about this complaint not being one this service can look at, I can see an ombudsman has considered that point and has decided this service can look into this complaint, so I won’t be commenting further on this. Turning to the lending decision, while Danesmead wasn’t regulated by the FCA when it lent, it was regulated by the Office of Fair Trading (OFT) and it still needed to take reasonable steps to ensure that it didn’t lend irresponsibly. In practice this means that it should have carried out proportionate checks to make sure Miss M could repay the loans in a sustainable manner. These checks could take into account a number of different things, such as how much was being lent, the repayment amounts and the consumer’s income and expenditure. I think that it is important for me to start by saying that Danesmead was required to establish whether Miss M could sustainably repay her loan – not just whether the loan payments were affordable on a strict pounds and pence calculation.

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Of course, the loan payments being affordable on this basis might be an indication a consumer could sustainably make their repayments. But it doesn’t automatically follow this is the case. This is because the relevant regulations define sustainable as being without undue difficulties and in particular the customer should be able to make repayments on time, while meeting other reasonable commitments; as well as without having to borrow to meet the repayments. And it follows that a lender should realise, or it ought fairly and reasonably to realise, that a borrower won’t be able to make their repayments sustainably if they’re unlikely to be able to make their repayments without borrowing further. I’ve carefully considered all of the arguments, evidence and information provided in this context and what this all means for Miss M’s complaint. Danesmead has provided information to show that when it lent, Miss M signed an agreement, it also provided evidence to show that it saw a copy of her payslip and asked her about her income and expenses at the time. Danesmead also says that it saw Miss M’s bank statement but says Miss M didn’t give her permission for it to keep copies of her statement. Danesmead confirms that it took into account Miss M’s partner’s income when deciding to lend. I can see on the information provided that there is a note from Danesmead’s agent that suggests Miss M didn’t give permission for Danesmead to keep copies of her statement. But as Danesmead concedes it saw her statement from the time and Miss M has now provided her bank statement from the time, I’ve relied on this information Miss M provided as it provides a good insight into Miss M’s financial circumstances and would likely have been similar to what Danesmead saw. Based on what I’ve seen, I don’t think Danesmead should have lent to Miss M and I will explain why. The loan was taken out in her sole name and so while her partner was contributing towards the household bills, I think it would have been prudent for Danesmead to assess the loan solely on Miss M’s income taking into account her contribution towards the household bills. From what I can see, the information Miss M declared about her income and expenses at the time are different to what shows on her bank statement. The bank statement shows that Miss M’s income was around £945 at the time of the loan, she also received child benefit payments of around £75.20. The combined household bills were around £1,200 including things like rent, food and utilities, assuming Miss M paid half of this that would have been around £600. I can also see that there were credit commitments of around £500 on the account and including this loan, it would be around £800 paid towards credit commitments per month. I think in the circumstances; Miss M couldn’t afford to sustainably repay the loan. Even if I considered her partner’s income which I can make out as being about £1,000, this loan still wouldn’t have been affordable. Danesmead has made the point that Miss M had another source of income and I can see that some other credit payments were made into the account. Miss M has explained that the cost of getting the materials needed for this other source of income outweighed the profit she made, and I can see that the debits towards this outweighed the credit payments. So, I don’t think this other source provided her to extra income that would have made this loan affordable.

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I appreciate that Miss M managed to repay the loan but that doesn’t mean she did so sustainably and without needing to borrow further. I think Danesmead lent to Miss M when it shouldn’t have, and it needs to put things right. Putting things right  refund all interest and charges Miss M paid on loan;  pay interest of 8% simple a year on any refunded interest and charges from the date they were paid (if they were) to the date of settlement†;  remove any negative information about the loan from Miss M’s credit file. † HM Revenue & Customs requires Danesmead Investment Limited to take off tax from this interest. It must give Miss M a certificate showing how much tax it’s taken off if she asks for one. My final decision For the reasons given above, I’m upholding Miss M’s complaint. Danesmead Investment Limited should put things right as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss M to accept or reject my decision before 14 December 2021. Oyetola Oduola Ombudsman

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