While on the surface, the findings by the FOS in the example above seem entirely predictable given the circumstances of the borrower, there are two important points to note.
Firstly there were technically gaps between a number of the loans and each loan was separate – so the borrower repaid the loan and took a new loan out on average 5 to 7 days later. There were occasions when these gaps were longer (up to 36 days), but the FOS took the view that there was no clean break between loans and therefore considered them as one chain of loans and therefore treated them all as part of the single complaint. This increased the value of the award (as the borrower did not have to prove their case in every instance).
Secondly the FOS did not accept the assertion by Lender A that the decision to lend was made by an automated system, which was undertaking the affordability check. The Ombudsman noted “For the avoidance of doubt, Lender A is responsible for any lending approved by its own systems”. He further noted the importance of the lender both understanding and being able to interpret the results of the system.
It is important that all consumer credit firms, including P2P firms, have detailed responsible lending policies which set out how they assess affordability in line with the requirements of CONC 5. If firms do rely on automated systems, they should understand and set the parameters of the system and should ensure that reporting includes highlighting borrowers that may be at risk. This could be, for example, by highlighting repeat borrowing, increasing loan values or changing credit scores.