YOU COULD BE ENTITLED TO COMPENSATON

What is irresponsible lending?

Responsible lending is when a lender (or bank) accepts your application after ensuring that you can reasonably meet repayment deadlines – typically through a credit check or another type of assessment. The lender should explain the agreement in full and must decline the loan if repayment would be too difficult.

If a lender approves the application without believing that you can repay it – potentially without even checking if this is the case – it becomes irresponsible or unaffordable lending. Though this could be due to a deliberately predatory lender, basic negligence and even clerical errors are other possible culprits.

Responsible lenders generally enact a full affordability check that compares a borrower’s income, including the benefits they receive and even other active loans, against their usual expenses. From the money remaining, it’s a lender’s job to calculate if the borrower is able to afford the loan they’re asking for.

Thanks to the Consumer Credit Act 2006, borrowers can take action against agreements that ignore, or exploit, their financial situation, including an unfair dynamic with the lender. Whilst almost all loans include an interest rate and lenders always aim to make a profit, they cannot knowingly take advantage of desperate borrowers.

The criteria for irresponsible lending

Here are the main signs of irresponsible lending that you should look out for:

No credit check details

If you hear nothing from your lender about a credit check during your application, it’s wise to ask for a copy of your results. This helps you verify that the lender is aware of your status; and could be instrumental in preventing irresponsible lending practices before they begin.

Excessive interest rate

If your repayments are more than 5% and other services offer lower rates through an online loan calculator, your chosen lender could be taking advantage of your situation. Your credit status often affects your interest rates but a predatory lender can charge you even more.

Unnecessary additions

Irresponsible lenders also push additional services that significantly increase the fees you’ll need to pay – or they might try to downplay the loan’s hidden costs. Make sure you scan all the relevant documentation before signing a loan agreement to check for these additions.

How to complain about irresponsible lending

If you already have an unaffordable lending agreement and believe you were misled (or otherwise mistreated) during your application process, you should file a complaint. The usual process is as follows:

1. Contact a claims professional

Your first move should be to get in touch with a financial expert such as Claims Bible, who can help you through the usual complaints process. With ample experience in irresponsible or predatory lending claims, our advisors and legal partners work alongside you to build the strongest possible case. Though you can still file a complaint against an irresponsible lender without professional help, the advice we offer might be critical for proving your claim.

2. Speak to the creditor

It’s often possible to settle irresponsible lending disputes by directly getting in touch with the creditor, and not the debt collection agency. Even if a lender refuses to admit their negligence or malpractice, they could reduce the amount owed to suit your circumstances. As this is a financial matter, the lending company has only fifteen days to respond to your complaint. You might be able to wholly erase your debt, but this is unlikely.

Irresponsible lending success stories

The fear of failure prevents many victims of irresponsible lending from making a complaint, especially with the chance of a court case. However, there are a number of borrower victories which could give you hope for your own claim, such as:

Advantage Finance

After acquiring used car finance from Advantage in 2016, Mr F discovered his repayment schedule was unaffordable and got in touch with the FOS. They found that Advantage didn’t conduct sufficient credit checks, advising that Advantage refund his deposit as well as most of his payments up to that point.

Barclays

The Financial Conduct Authority discovered that Barclays had failed to accommodate the individual circumstances of their borrowers, making repayment effectively impossible. As a result, the FCA fined Barclays £26 million in December 2020 – reduced from £37 million due to the bank’s proactive compensation efforts.