Loans 2 Go Limited · DRN-3127138

The complaint Mr M has complained that Loans 2 Go Limited trading as Logbook Loans (“L2G” or “the lender”) was irresponsible to have agreed credit for him. What happened L2G provided Mr M with a loan of £2,000 in November 2013. The total amount of £9,128, including interest and charges, was to be repaid over three years in weekly instalments of £59 or £253.55 a month. This was a ‘log book’ loan, in other words it was granted on the basis that Mr M provided L2G with a bill of sale for his car. This meant that if Mr M didn’t make his loan repayments L2G could potentially recoup its losses through the sale of the vehicle. I understand Mr M had repaid his loan by January 2017. Mr M said the loan was unaffordable for him and L2G would have understood this had it carried out proper checks before lending to him. He says he had to borrow from friends and family to meet his repayments and it caused him a lot of stress. One of our investigators looked into Mr M’s complaint and recommended that it be upheld because they concluded L2G had lent irresponsibly. They recommended L2G refund the payments Mr M made above the original amount of £2,000 he borrowed along with compensatory interest. They also recommended L2G remove any adverse information about the loan from Mr M’s credit file. L2G didn’t agree with this recommendation. It said that Mr M’s credit commitments and all his monthly expenditure was taken into consideration. It says it confirmed beyond all reasonably doubt the loan was affordable for him and wouldn’t put him in a more difficult position. It said Mr M gave no indication of being in financial difficulty, and he made his repayments with relative ease. L2G asked for the complaint to come to an ombudsman to review and resolve. 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. L2G needed to check that Mr M could afford to meet his repayments sustainably before agreeing credit for him. In other words, it needed to check he could make his repayments out of his usual income and without experiencing financial difficulty or adverse consequences, in particular without incurring or increasing problem indebtedness. The assessment needed to be proportionate to the nature of the credit and Mr M’s circumstances. With this in mind, my main considerations are did L2G complete reasonable and

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proportionate checks when assessing Mr M’s application to satisfy itself that he would be able to make his repayments without experiencing difficulty? If not, what would reasonable and proportionate checks have shown and, ultimately, did L2G make a fair lending decision? L2G said in its final response to Mr M that it verified that he received a minimum of £2,199.43 monthly via an online income verification tool. It said it extensively reviewed his application, checked his credit file and calculated that his monthly expenditure was £1,870.93. It then added a buffer of 10% to his verified expenditure to account for any fluctuations in his monthly income or expenditure. L2G says that even after this, Mr M’s loan repayments would have been affordable. L2G provided this Service with the information it relied on in making its lending decision. This included an income and expenditure form, with the totals mentioned above. I’ve seen no evidence that it checked Mr M’s credit file or used an online credit reference agency tool to check his income. L2G has provided bank statements from around the time of the loan from two of Mr M’s accounts with annotations which show it used these statements to confirm some of the income and expenditure figures. (His main account statements cover most of 20 September to 19 November 2013 and his second account from 1 August to 4 November 2013.) It seems on the face of it that L2G carried out reasonable and proportionate checks by looking into Mr M’s means and verifying some of the figures. So I’ve started by reviewing the information L2G relied on. I note the lender used national statistical data to estimate Mr M’s minimum spend on household costs and utilities. I’ve also noted that his income included working and child tax credits and that he had four dependents. L2G estimated that Mr M would have a disposable income of £328.50 a month. Mr M’s monthly loan repayment came to about £253, leaving him with an estimated £75 left over to meet any one-off or unexpected expenses. This is less than L2G’s buffer of 10% of expenditure (£187) which it says it would have taken into consideration in its affordability assessment to account for any fluctuations. It seems to me with this level of disposable income and given his circumstances, there was a risk to Mr M of not being able to meet his repayments sustainably over the three year loan term. So, even without any further investigation, I think L2G’s assessment showed the loan wasn’t likely to be affordable for Mr M in a sustainable manner. Furthermore, I think there were indications in the information L2G had that Mr M might struggle to meet his repayments sustainably. Mr M’s bank statements show he was repaying a high cost guarantor loan and a pawnbroker loan, and it appears he was also making payments to two debt collectors. Mr M had an overdraft facility on one of his accounts. He was overdrawn by over £2,500 (since 1 August at least) and paid planned and unplanned overdraft charges of £92 and £85 in September and October 2013 respectively. On his basic bank account, which didn’t have an overdraft facility, Mr M had direct debits returned almost every week, for example he had two payments returned in September 2013 and four and three returned in October and November respectively. In addition to identifiable expenses, Mr M made frequent cash withdrawals amounting to over £1,000 in October, for example, and he was still making cash withdrawals on his overdrawn account. L2G said in its response to our investigator that it had taken Mr M’s overdraft use and the missed direct debit payments into account. It said its customers might have adverse information on their credit files however it ensures that they are not put into a worse financial position by its lending. I can accept that L2G might not automatically decline a loan because an applicant had missed some regular payments. In this case, however, I think the ongoing pattern of returned payments and the unidentified cash withdrawals ought to have caused concern. I note Mr M said he planned to use the loan for Christmas spending and for short

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term cashflow, not for debt consolidation, so it seems to me that L2G’s loan would increase Mr M’s indebtedness. L2G said that Mr M met his repayments for this loan with relative ease. I’ve reviewed the statement of account it provided and I can’t say this was the case. Mr M missed a payment in December 2014 and again in January 2015. He missed a further five payments and it looks like he entered into a repayment plan to repay his arrears from February 2015. He continued to miss payments at times, was sent numerous late payment communications and was issued with a default notice in December 2015. He eventually repaid his loan in January 2017. I think Mr M’s difficulties were foreseeable and L2G didn’t treat him fairly when it agreed to lend to him. Taking everything into account, I’ve concluded that L2G was irresponsible to have agreed a loan for Mr M on this occasion. I am therefore upholding his complaint and I’ve set out below what L2G needs to do to put things right for him. Putting things right I think it’s fair that Mr M repays the capital he borrowed as he’s had the use of this. However, I don’t think he should be liable for any interest or charges on this amount or have his credit record adversely impacted. In order to put things right for Mr M, L2G needs to: a) Refund to Mr M all payments he made above the original amount of £2,000 he borrowed; b) Add 8% simple interest per annum to these overpayments from the date they were paid to the date of refund; and c) Remove any adverse information about this loan from Mr M’s credit file. It seems likely that this has already happened but for completion, L2G should also revoke the Bill of Sale for Mr M’s car and return any relevant documents to him. *HM Revenue & Customs requires L2G to deduct tax from this interest. It should give Mr M a certificate showing how much tax it has deducted, if he asks for one. My final decision For the reasons set out above, I’m upholding Mr M’s complaint about Loans 2 Go Limited trading as Logbook Loans and it should put things right as I’ve outlined. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 19 December 2021. Michelle Boundy Ombudsman

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