A lender firm who mis-sold a loan to a Scottish couple failed to undertake the necessary affordability checks and was responsible for any failings, not the intermediary adviser, Catherine Wolthuizen has ruled.
In a ruling that has written £100,000 off an “irresponsible” loan, the ombudsman said: “I considered that White Label [Lending Limited] should have ensured that the loan was affordable and could be repaid sustainably.”
In 2007, a Glasgow couple, who cannot be identified, borrowed £20,000 on a APR of 16.2 per cent over 40 years — at a total cost of almost £124,000 —from the West Midlands-based White Label Lending.
The couple’s legal representative Mike Dailly, from Glasgow-based Govan Law Centre, said: “UK life expectancy is around 78, and Glasgow has the lowest life expectancy in the UK, so the idea that this couple would have been able to pay it off is absurd. The lender had an obligation to make sure the loan was affordable.”
In the ruling, FOS said the lender failed to undertake a proper affordability check, had overridden its own lending criteria and irresponsibly sold an unaffordable product to the couple, which was secured on their home.
The ombudsman also ruled against the lender’s claim that the IFA had sold the product, and said the couple could not pursue a claim against the company, which had since folded.
FOS ordered White Label to release the couple from the current loan agreement and create a new arrangement for repayment on the outstanding amount, and waive any outstanding debt from the date of the oldest borrower’s 65th birthday. The lender can not charge interest on the remaining debt.
Mr Dailly said: “It raises two important principles: first, that a lender is ultimately responsible for their own product and cannot always avoid liability by pointing to a third-party financial adviser who sold their product as an intermediary.
“Secondly, a lender has to adhere to its own lending criteria and make sufficient enquiries to assess affordability.”
Right of Reply
A spokesman for White Label Loans said: “We accept the ombudsman’s decision and have made the necessary changes to the borrowers’ agreement. It will progress with terms acceptable to all parties.”
