Clydesdale Bank plc trading as Virgin Money · DRN-6057668

The complaint Miss B complains that Clydesdale Bank plc trading as Virgin Money (Virgin Money) irresponsibly lent to her when it provided a credit card. What happened Miss B applied for a Virgin Money credit card. Her application was successful and an account was opened with a £3,700 credit limit in April 2024. Miss B raised a complaint with Virgin Money, stating her belief it had been irresponsible in lending to her. Miss B stated the lending was unaffordable and she clearly had financial difficulties. Miss B explained she was managing a large loan and a mortgage. She also said she was self-employed and had a fluctuating income. Miss B said her personal circumstances should have raised clear concerns about affordability. The account was used to transfer an existing balance from another lender. But, as she was unable to repay the borrowing within the promotional period, the interest and fees have significantly impacted her financial wellbeing. Miss B explained how she wished Virgin Money to resolve her complaint. Virgin Money rejected the complaint. It said there were no indications of any financial issues in the Credit Reference Agency (CRA) data. And the level of borrowing was appropriate to the income. It further explained its use of the household income, as Miss B had provided this information in her application. Virgin Money stated its automated affordability assessment showed a surplus of £965.83 per month. Miss B did not accept Virgin Money’s assessment of her complaint and referred the matter to the Financial Ombudsman Service. In her referral, Miss B said Virgin Money lent to her irresponsibly, as she believed the credit card was unaffordable. Miss B highlighted her fluctuating income, and the other demands on her finances, including her three dependants and her business expenses. Miss B stated Virgin Money shouldn’t have used the household income in its calculations. She believes this was misleading, as her partner was also in extreme debt. And, as the account was in her sole name, affordability should have been based upon her income alone. Miss B said Virgin Money failed to consider her true take home pay and didn’t conduct proper affordability checks. Miss B said she only required a credit limit of around £1,600, to allow her to make balance transfers. But Virgin Money approved a limit of £3,700. This increased Miss B’s financial exposure.

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Miss B said the lending has had a serious impact on her financial position and wellbeing. Miss B was unable to repay the balance on the card within the promotional period, so interest had built up on the account. Miss B said the stress of juggling the debt, alongside her other responsibilities, had resulted in anxiety and sleepless nights. This had left her feeling trapped. Our investigator considered all that had been said by Miss B and Virgin Money. They requested additional information from Miss B in the form of bank statements, from around the time of the credit card application. This was to allow the Investigator to gain a greater understanding of Miss B’s financial position. In summary, the Investigator thought Virgin Money ought to have understood more about Miss B’s income and expenditure. Had it done so, they thought the checks would have revealed that Miss B didn’t have sufficient disposable income to support the borrowing. The investigator therefore upheld Miss B’s complaint. Virgin Money did not accept the Investigator’s view. It raised a series of challenges in support of its position. These included the conduct of the account, as Miss B consistently paid more than the minimum payment required. And it believed this evidenced Miss B didn’t have financial difficulties. Virgin Money also stated it had used a household affordability assessment in this case. It noted that where the household income is considered, the expenditure of the financial associate is also included in the net disposable income calculation, and its strategy was reviewed and updated regularly, ensuring alignment with the relevant rules and guidance. Virgin Money subsequently raised further challenges. It believed Miss B held other bank accounts, because the statements the investigator had shared with it didn’t show her income being paid into the account. In addition, Virgin Money questioned why Miss B had misrepresented her income and employment status when completing the application. The investigator said they were unable to comment on the information Miss B had provided to Virgin Money. But further stated that if Virgin Money had conducted reasonable and proportionate checks, it would have discovered any discrepancies before agreeing the credit card account. Having considered Virgin Money’s challenges, the Investigator’s view remained unchanged. As an agreement couldn’t be reached, the case was passed to me to decide. 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. I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint.

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Having done so, I’ve reached the same outcome as the Investigator. I’ll explain my reasons why. I’d like to acknowledge Miss B and Virgin Money for providing detailed information throughout the investigation of this complaint. I may not address every point individually in detail. But I’d like to assure both parties that the evidence they provided has been at the heart of my consideration of Miss B’s complaint. Additionally, I’d like to thank Miss B for sharing details of the difficulties she’s encountered, and how this has impacted her. We’ve explained how we investigate complaints about unaffordable and irresponsible lending on our website, and I’ve used this approach to help me decide Miss B’s complaint. The rules and regulations in place at the time Virgin Money provided Miss B with the credit, required it to assess whether she could afford to repay the borrowing in a sustainable manner, often referred to as an affordability assessment. Virgin Money needed to conduct reasonable and proportionate checks to ensure it didn’t lend to Miss B irresponsibly. It’s not about Virgin Money assessing the likelihood of it being repaid, but it had to consider the impact of the repayments on Miss B. There is no set list of checks it had to perform, but it could consider different things such as the amount of the credit, the amount of the monthly repayments, and the overall circumstances of the borrower. Miss B applied for the credit card online. She said she had a personal income of £27,000, and a total household income of £82,000. Virgin Money told us Miss B stated on the application that she was employed on a full-time basis, when in fact, she was self-employed. Virgin Money validated the income figures through the CRA and recorded a net household income of £5,119.21 per month. Miss B’s monthly mortgage repayments were recorded as £1,096.67. The CRA data also showed revolving debt (such as credit cards) totalling £1,690. And non- revolving debt (for example loans) totalling £6,159. The CRA information didn’t show any adverse data, such as defaults, County Court Judgements (CCJs), bankruptcy, etc. Virgin Money used this data to decide if it would lend to Miss B. It performed a calculation to determine the disposable income available. Miss B’s living costs were assessed using Office for National Statistics (ONS) data. Using ONS estimates is a reasonable method for lenders to use to calculate a consumer’s disposable income. But it must ensure there aren’t other factors which would suggest a greater understanding of the individual’s circumstances are required. The household expenditure and mortgage costs were recorded as around £2,954. Payments to existing credit arrangements were recorded as around £1,199. This resulted in a household disposable income figure of around £966. During the application, Miss B applied to transfer £1671.65 of her existing debt to the new Virgin Money account. I understand the balance transfer initially operated on a 0% interest basis. The information received from Virgin Money confirms Miss B’s online application was auto approved.

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I’ve considered whether the checks Virgin Money conducted were reasonable and proportionate. Whilst its calculations do show a good disposable income, there are factors which I believe should have prompted a greater consideration of Miss B’s circumstances. I’ve looked at the application data, and it shows the credit card was approved on the basis of the household income rather than Miss B’s sole income. So, affordability is dependent upon the assumption Miss B had access to the household income. I’ve taken the relevant regulations into account. And I think it’s fair to note they allow lenders to use income from another person, as far as it’s reasonable to expect such income to be available to the borrower to make repayments under the credit agreement. So, I understand there are provisions that mean Virgin Money can use household income. But where the borrowing is dependent on that additional income, I’d expect it to get a clear picture of how sustainable it was. I’m not persuaded Virgin Money did that in this instance. Virgin Money said it is reasonable to expect household finances to be managed together. I can see Miss B and her partner were contributing to the joint household expenditure. But it doesn’t necessarily follow that the use of the joint household finances would extend to repaying the individual debts of either Miss B or her partner. Nor does it show that there is agreement between them to service each other’s debts. Miss B said affordability should have been considered based on her circumstances alone. She further states that her partner was in extreme debt at the same time. So, using the household income created an unrealistic picture of her true disposable income. I believe Virgin Money should have made further enquiries, before deciding the affordability of the credit based on the household income. These should have determined that either Miss B could manage the lending independently. Or, if not, that she could reasonably expect to be able to sustain the borrowing from the joint household income. And, if so, that the household income was sufficient to support the lending. I’ve also considered the level of potential borrowing offered by Virgin Money. The credit limit was set at £3,700, which is a significant amount. So, given the reliance on Miss B’s partner’s income to manage the borrowing, I don’t believe the checks undertaken by Virgin Money were reasonable and proportionate. I’ve therefore considered what reasonable and proportionate checks would have shown if Virgin Money had carried them out at the time. Miss B has provided bank statements and documents from HMRC, including the summary of Miss B’s tax return for the 2023 – 2024 tax year. This is relevant as the credit card was issued in April 2024. This document shows Miss B’s profits from her self-employment amounted to £17,893. Having deducted tax and National Insurance contributions, this results in an average net monthly amount of around £1,348. In addition, Miss B received £223.20 child benefit payments. So, this takes her average monthly funds to £1,571.20. And although I’ve included the child benefit payments in my calculations above, I do recognise that having three dependants would put additional demands on the household finances.

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Virgin Money said it believes Miss B holds other accounts, as the statements she provided don’t show an income being paid into the account. However, the nature of Miss B’s business means she receives individual payments from her clients on an ad-hoc basis. These payments are visible in the statements provided. Miss B has further explained that her takings from her business fluctuate. And this is why she believes her tax return gives the best indication of her financial position. I’ve carefully considered the statements Miss B has provided. Whilst I accept that her income may fluctuate, typically her essential expenditure is likely to be more consistent. So, using this information, in conjunction with what the HMRC documents show regarding Miss B’s income, I’m able to get a better understanding of her financial position. To be clear, I’m not saying Virgin Money had to take this approach. There are different ways in which it could have gained a greater understanding of Miss B’s true financial position. But this is a straightforward way for me to understand what Virgin Money would have seen had it conducted further checks. Miss B has told us she has expenditure in relation to running her business. In addition, she contributes to the household costs and has existing credit agreements and other financial commitments, such as insurances. Miss B’s average monthly essential expenditure was around £1,390. Miss B told us she tries to save money to meet her tax liabilities. But she often needs to tap into these savings to meet her everyday living expenses. There is evidence to support this on her statements. Miss B had a disposable income of around £181 after her essential expenditure was accounted for, and when the child benefit payments were treated as funds solely available to her. Miss B’s income fluctuated, meaning some months she may have had insufficient funds to meet her essential expenditure. And she was routinely using funds she had set aside (to meet her tax liabilities) for everyday expenditure. Miss B was supporting the household expenditure, including the care of three dependants. Miss B had little scope for savings to meet unexpected or emergency financial impacts. So, when I consider all this information, I believe that had Virgin Money conducted these checks, they would have concluded the potential borrowing was not affordable. Virgin Money has confirmed Miss B requested a balance transfer of £1,671.65. Miss B has said Virgin Money shouldn’t have provided a credit limit in excess of this amount. It could be argued that providing Miss B with a balance transfer card was advantageous to her. This was because it potentially allowed Miss B to reduce the cost of some of her debt. But equally, as the existing line of credit would remain open (on the accounts the balance moved across from), Miss B could reuse it. I haven’t seen any evidence that Virgin Money sought any assurances that the existing accounts would be closed. In addition, the credit limit on the account was higher than the balances transferred to it. Therefore, the provision of the credit card increased the credit available to Miss B, beyond that which she was transferring. So, there was a possibility Miss B would become further indebted.

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Miss B has also advised she was unable to repay the amount of the balance transfer during the promotional period. So this amount (plus the other spending on the account) is now accruing interest. So, taking all this into consideration, I don’t believe it was fair to provide the credit card account to Miss B. Virgin Money maintains its view that because Miss B was making more than minimum payments to her account, this evidenced she didn’t have financial difficulties. Whilst I agree that paying additional amounts can be a positive indicator of a consumer’s financial position, it needs to be considered in the wider context. Over the 18-month period following the account opening, Miss B consistently paid more than the minimum payments required. However, at the same time the Virgin Money credit card was highly utilised. And for a significant period, it was operating close to the credit limit. So, although Miss B’s payments exceeded the minimum amounts required, her balance wasn’t reducing significantly, as she was spending on the account again. Therefore, I’m not persuaded that her paying more than the minimum shows she wasn’t experiencing financial difficulties. Miss B’s behaviours suggest she was, to some extent, in a cycle of making repayments and then reusing the available credit. Virgin Money has raised the issue of why Miss B misrepresented information when applying for the account. It specifically said that Miss B’s incorrect statement about her employment status would have impacted the application outcome. I agree that some of the information provided was inaccurate. However, this doesn’t change my view about the proportionality of the checks Virgin Money conducted. Had it undertaken a more thorough assessment at the time, these discrepancies would have come to light and could have been addressed before the credit was granted. But I recognise Virgin Money’s concerns and agree consumers should take all necessary steps to ensure the information they provide is accurate. Miss B has commented on the impact on her health and a feeling of being trapped, due to her finances. I’m sorry Miss B is facing these challenges, and I hope she is able to access the support she needs. In respect of her finances, I’ve asked the investigator to share details of organisations that may be able to support Miss B. In reaching my conclusions, I’ve also considered whether the lending relationship between Virgin Money and Miss B might have been unfair to Miss B under Section 140A of the Consumer Credit Act 1974 (“CCA”). However, I’m satisfied that what I direct Virgin Money to do in the section below results in fair compensation for Miss B given the overall circumstances of her complaint. For the reasons I’ve explained, I’m also satisfied that, based on what I’ve seen, no additional award is appropriate in this case. Putting things right As I’ve concluded Virgin Money shouldn’t have provided the credit card, I don’t think it’s fair for it to charge any interest or fees. Miss B has had the benefit of the money she spent on the account, so I think she should pay this back. Therefore, Virgin Money should: • Rework the account removing all interest, fees, charges, and insurances (not already

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refunded) that have been applied. If the rework results in a credit balance, this should be refunded to Miss B, along with 8% simple interest per year* calculated from the date of each overpayment to the date of settlement. Virgin Money should also remove all adverse information recorded regarding this account from Miss B’s credit file. • Or, if after the rework there is still an outstanding balance, Virgin Money should arrange an affordable repayment plan with Miss B for the remaining amount. Once Miss B has cleared the outstanding balance, any adverse information recorded in relation to the account should be removed from her credit file. • If Virgin Money has sold the debt to a third party, it should arrange to either buy back the debt from the third party or liaise with them to ensure the redress set out above is carried out promptly. *HM Revenue & Customs requires Virgin Money to deduct tax from any award of interest. It must give Miss B a certificate showing how much tax has been taken off if she asks for one. My final decision It follows that I’m upholding this complaint as I don’t think Clydesdale Bank plc trading as Virgin Money, lent to Miss B responsibly and I direct it to settle matters in the way I’ve outlined above. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss B to accept or reject my decision before 8 April 2026. David Hilton Ombudsman

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