Zopa Bank Limited · DRN-6302641

The complaint Mrs C complains that Zopa Bank Limited (“Zopa”) lent to her irresponsibly and that the loan was unaffordable. Specifically that they didn’t carry out sufficient checks regarding her income and expenditure. What happened In July 2024 Mrs C received a loan from Zopa. It was in the principal sum of £20,000; for a 48-month term; and with an interest rate of 10.6% APR. The monthly repayments were £508.12: total repayable £24,389.62. The declared purpose of the loan was debt consolidation. Mrs C complained to Zopa. She said that it was irresponsible of them to provide her with the loan because of her financial circumstances, and the loan was unaffordable for her. Zopa looked into the complaint and issued a final response letter in September 2025. Zopa thought they had carried out reasonable and proportionate checks into Mrs C’s circumstances and said that the lending decision was appropriate and affordable. They signposted Mrs C to internal and external help with any financial difficulties. They didn’t uphold the complaint. Mrs C didn’t accept Zopa’s response and therefore referred her complaint to our service. She said that Zopa failed to carry out sufficient affordability checks and the loan was unaffordable for her. One of our Investigators looked into it. She felt that Zopa had carried out reasonable and proportionate checks into Mrs C’s overall financial circumstances; but that Zopa had not reached a fair decision to provide the loan. The Investigator recommended that Mrs C’s complaint be upheld; and set out how Zopa should put things right. Mrs C didn’t dispute this position but Zopa did and asked for an Ombudsman’s decision. They maintained that they had carried out reasonable and proportionate checks which showed that the loan was affordable for Mrs C. They had not needed to obtain further information about her income and expenditure. The Investigator looked at the complaint again. She didn’t change what she’d said. As an agreement couldn’t be reached, the complaint has been 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. Our approach to complaints about irresponsible and unaffordable lending is set out in detail on our website. I’ve used this approach to help me decide Mrs C’s complaint. For example, I’ve considered the rules and guidance on responsible lending relevant to the time of the lending decision set out in the Financial Conduct Authority’s (“FCA”) Consumer Credit Sourcebook (“CONC”).

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In summary, Zopa needed to carry out reasonable and proportionate checks before providing the loan to ensure they did not lend to Mrs C irresponsibly. There is no set list of the checks Zopa had to do. What constitutes a proportionate affordability check will depend upon a number of factors including, but not limited to, the amount, type and cost of the credit Mrs C was seeking as well as her overall financial circumstances. I've kept all of this in mind when considering whether Zopa did what was required before providing the loan to Mrs C. Zopa say that for each decision to provide credit, they undertake detailed affordability assessments. They consider information provided by the customer for example regarding income; credit reference agency (“CRA”) data regarding income and other debt and existing repayment commitments; data supplied by the Office for National Statistics (“ONS”); and any existing information and data they already hold. The applicable rules and guidance do not require a lender to see full evidence of expenditure in every case. Instead the lender has discretion about how they conduct checks to satisfy themselves that lending is affordable to applicants, provided the checks are reasonable and proportionate. This includes the consideration of statistical data where it is reasonable and proportionate to do so, as I think was the case here. When Mrs C applied for the loan, she declared that she was working full time with an annual gross income of £44,000. Zopa validated this income through CRA data. Mrs C further declared that she was a homeowner with a mortgage; her monthly housing costs were £400; and she had one dependant. Zopa assessed Mrs C’s net monthly income to be £2,795.79. They further assessed her housing costs at £320.25, her existing credit commitments at £1,028.90, and her essential expenditure at £784. Mrs C was thereby left with sufficient net monthly disposable income to pay the cost of the new loan and to meet her day-to-day expenses. Zopa also completed a credit check before entering into the loan. Mrs C’s total unsecured debt was £20,578 with a debt-to-income ratio of 48%. The credit check showed no defaulting accounts or arrears; and no County Court Judgments (“CCJs”), Individual Voluntary Arrangements (“IVAs”) or bankruptcy. Overall, Mrs C’s existing credit commitments appeared to be well maintained. I think that the checks carried out by Zopa to establish disposable income before granting the loan were reasonable and proportionate. However, although I think the checks were reasonable and proportionate, I also need to consider whether Zopa made a fair decision to lend. I’ve considered in particular Mrs C’s housing costs and how they were treated by Zopa. Their credit file data shows a bureau mortgage figure with monthly payments of £1,281 payable over 163 months. Further that the inferred housing costs figure payable by Mrs C was £640.50. This represents 50% of the bureau mortgage figure and I think it would be reasonable to expect her to be paying 50% in the absence of any information to the contrary. I think therefore that Mrs C’s housing costs were £640.50 rather than £320.25. Applying this figure together with her existing credit commitments at £1,028.90, and her essential expenditure at £784, would mean that Mrs C was left with no net monthly disposable income after meeting the loan payments.

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Even if I am wrong about that, I think it would have been reasonable for Zopa to utilise Mrs C’s declared monthly housing costs of £400 in their assessment as being greater than the £320.25 which they did use. Applying this figure along with her existing credit commitments and essential expenditure (as above), would mean that Mrs C was not left with sufficient net monthly disposable income after meeting the loan payments to cover her day-to-day expenditure and to meet any emergencies. I have noted the expressed purpose of the loan being debt consolidation whereby Mrs C might reasonably have been expected to pay down some of her existing debt. This does not obviate the need for the loan to be sustainably affordable without any such consolidation taking place. Overall it appears that Mrs C did not have sufficient disposable income to meet the product repayment cost of the loan and so the credit was not affordable for her at the time it was provided. Taking all these factors into account, I don’t think Zopa treated her fairly in their decision to provide her with this loan. I’ve also considered whether the relationship between Mrs C and Zopa might have been unfair to Mrs C under Section 140A of the Consumer Credit Act 1974 (“CCA”). However, for the reasons I’ve already given, I think Zopa treated her unfairly in relation to this matter. I don’t therefore need to reach a decision on this issue. Putting things right As I don’t think Zopa should have granted this loan: Zopa should add up the total repayments Mrs C made and deduct them from the total amount of money she received; If this results in Mrs C having paid more than she received, any overpayment should be refunded to her together with 8% simple interest calculated from the date the overpayment was made to the date of settlement; + If any capital balance remains outstanding, Zopa should work with Mrs C to agree an affordable and sustainable repayment plan; Once any sum due to Zopa has been paid, they should remove all relevant adverse information from Mrs C’s credit file. + HMRC require Zopa to deduct tax from any award of interest. They must give Mrs C a certificate showing how much tax has been taken off if she requests one. My final decision My final decision is that I do uphold this complaint in relation to the Zopa loan. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs C to accept or reject my decision before 26 May 2026. Richard Ellison Ombudsman

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