HSBC UK Bank Plc · DRN-6242470

The complaint Miss S complains that HSBC UK Bank Plc has irresponsibly lent to her. What happened Miss S was approved for a HSBC credit card in November 2019, with a £5,000 credit limit. Miss S says this was irresponsibly lent to her. Miss S made a complaint to HSBC, who did not uphold her complaint. HSBC said that they hadn’t identified a bank error, therefore they were not upholding her complaint. Miss S brought her complaint to our service. Our investigator upheld Miss S’ complaint. She said that HSBC should have made further checks, and further checks would have revealed that the credit was not sustainable and affordable for Miss S. HSBC asked for an ombudsman to review the complaint. They said they had verified Miss S’ income in line with the regulator’s rules, and it wouldn’t be proportionate to request pay slips/bank statements for all applications, as it would act as a barrier to credit. They said Miss S knowingly provided false information to obtain credit. Miss S said that as a direct result of the lending provided she had been left in a spiral of debt, and to try and manage the situation she had to complete numerous balance transfers, which also incurred fees, increasing her overall debt. She said in addition, she needed to take out further credit simply to make ends meet and cover everyday living expenses, and her debt is now approximately £14,000. So she wanted these factors to be considered for redress and compensation. 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. Before agreeing to approve the credit available to Miss S, HSBC needed to make proportionate checks to determine whether the credit was affordable and sustainable for her. There’s no prescribed list of checks a lender should make. But the kind of things I expect lenders to consider include - but are not limited to: the type and amount of credit, the borrower's income and credit history, the amount and frequency of repayments, as well as the consumer's personal circumstances. I’ve listed below what checks HSBC have done and whether I’m persuaded these checks were proportionate. A CRA reported that Miss S had unsecured debt of £17,000, and revolving debt (such as credit cards, store cards, overdrafts, etc) of £400. The CRA reported that Miss S had no County Court Judgements showing on her credit file, but she previously had defaulted on an account years ago. It may help to explain here that, while information like a default on someone’s credit file may often mean they’re not granted further credit – they don’t automatically mean that a lender won’t offer borrowing. So I’ve looked at what other checks HSBC made, to see if they made a fair lending decision.

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Miss S had not been in arrears on any accounts within the six months prior to the checks. HSBC also completed an affordability assessment. They used modelling to estimate Miss S’s outgoings, which is an industry standard way of estimating outgoings, and a CRA told them Miss S’ monthly credit commitments. Miss S declared a gross annual income of £21,000, which would not be unusual for someone in Miss S’ circumstances (age, employment status, demographic information etc) to earn. So I’m not persuaded that this alone should have prompted HSBC to complete further checks such as asking for her pay slips or requesting bank statements. But the credit limit HSBC was approving for Miss S was for £5,000. This was almost a quarter of Miss S’ declared gross annual income, when she already had a high level of debt compared to her gross annual income. While I’m aware the HSBC credit card had an introductory offer for balance transfers, the data showed that Miss S only had £400 in revolving debt (such as credit cards/store cards/overdrafts etc). So even if Miss S used the HSBC credit card to transfer the £400 revolving balance, her debt to income could be over 100% of her declared income if she used the full amount of credit on the HSBC credit card and considering her other unsecured debt. So I’m persuaded that HSBC should have made further checks, to ensure that the lending would be affordable and sustainable for Miss S. There’s no set way of how HSBC should have made further proportionate checks. One of the things they could have done was to contact Miss S to ask her to confirm her exact monthly income and outgoings. Or they could have asked for her bank statements as part of a proportionate check to ensure the lending was sustainable and affordable for her. Miss S has provided the bank statements leading up to this lending decision. Miss S’s net income is less than what HSBC had used in their affordability assessments. When our investigator asked Miss S to explain her income at the time, she told her that “during this time period I was picking up temporary work where I could via an agency. This work was not guaranteed and was only paid if and when I worked hence why the payments are adhoc” (sic). So if HSBC would have made further checks for the reason I gave earlier, then it would have come to light that Miss S wasn’t in full time employment with a secure income. She had long periods of time with no regular income, so I can’t fairly say the repayments for a £5,000 credit card would be sustainable and affordable if she wasn’t regularly earning money. Although HSBC have said that Miss S knowingly gave them false information to obtain credit, it’s likely that Miss S was declaring what she thought she would earn per year. And she would not be aware of HSBC’s internal parameters. I’m sorry to hear what Miss S has said about the impact of her debt overall, and the financial situation she’s in today. But I can only consider the actions of HSBC here. She already had debt of around £17,000 prior to the HSBC credit card being opened, so as this debt was more than three times the credit limit that HSBC gave her, it’s probable this would have had a bigger impact on her situation. That’s not to take away the impact of any lending HSBC gave her, but it wouldn’t be proportionate to ask HSBC to refund other companies balance transfer fees if she transferred balances to them, as our standard approach to these types of complaints are to ask HSBC to refund any fees, interest, and charges they charged Miss S. And I’m not persuaded it would be fair here to provide different or additional redress for Miss S in all of the circumstances of her complaint.

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I’ve also considered whether the relationship might have been unfair under s.140A of the Consumer Credit Act 1974. However, I’m satisfied the redress I have directed at the end of this decision results in fair compensation for Miss S in the circumstances of her complaint. I’m satisfied, based on what I’ve seen, that no additional award would be appropriate in this case. Putting things right Our investigator has suggested that HSBC takes the actions detailed below, which I think is reasonable in the circumstances. My final decision I uphold this complaint. HSBC UK Bank Plc should take the following actions: Rework the account removing all interest, fees, charges, and insurances (not already refunded) that have been applied; If the rework results in a credit balance, this should be refunded to Miss S along with 8% simple interest per year* calculated from the date of each overpayment to the date of settlement. HSBC should also remove all adverse information regarding this account from Miss S’ credit file; Or, if after the rework there is still an outstanding balance, HSBC should arrange an affordable repayment plan with Miss S for the remaining amount. Once Miss S has cleared the balance, any adverse information in relation to the account should be removed from Miss S’ credit file. *If HSBC considers that they are required by HM Revenue & Customs to deduct income tax from that interest, they should tell Miss S how much they’ve taken off. They should also give Miss S a tax deduction certificate if she asks for one, so she can reclaim the tax from HM Revenue & Customs if appropriate. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss S to accept or reject my decision before 23 April 2026. Gregory Sloanes Ombudsman

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