Zopa Bank Limited · DRN-6228596

The complaint Mr L complains that Zopa Bank Limited lent irresponsibly when it approved three loan applications he made. What happened Mr L successfully applied for three loans with Zopa as follows: Event Date Amount Total Payment Term Loan 1 Dec-20 £10,000 £13,004.36 £216.74 60 months Loan 2 Oct-21 £15,000 £19,070.50 £397.30 48 months Loan 3 May-22 £8,000 £10,752.31 £224.01 48 months When making each application Mr L provided details of his income, advising he was employed. In the application for loan 1, Mr L said he was renting. For the applications for loans 2 and 3 Mr L said he was a homeowner with no mortgage. Loan 2 refinanced loan 1. Loan 3 ran consecutively to loan 2. For each application, Zopa completed a credit search to get a picture of Mr L’s debts and outgoings. For loan 1, Zopa found Mr L had outstanding debts totalling £1,669, for loan 2 it was £11,694 and for loan 3 it was £18,462.No adverse credit, defaults or recent missed payments were noted when the credit file was checked for each application. Zopa completed affordability assessments taking Mr L’s income and regular outgoings into account. Zopa says that for all applications it found Mr L was able to sustainably afford the new repayments and approved the loans. There were no missed payments on the loans Mr L obtained from Zopa. Loans 2 and 3 were settled early in June 2024. More recently, Mr L complained that Zopa lent irresponsibly and it issued a final response. Zopa said it had carried out the relevant lending checks before approving all three applications and didn’t agree it lent irresponsibly to Mr L. An investigator at this service looked at Mr L’s complaint. They thought Zopa had completed proportionate checks when considering the applications Mr L made. The investigator thought Zopa reasonably approved all the applications based on the information it obtained. Mr L asked to appeal and said he’s never owned his home and that his credit file didn’t show any evidence of a mortgage. Mr L explained he was renting throughout the period he was borrowing from Zopa. Mr L added that in September 2021 he wasn’t working and was a full time student in receipt of student loans of around £13,000 a year and that prior to this he was in receipt of universal credit. Mr L said his bank statements would’ve shown he wasn’t

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working and had a limited income from student loans. Mr L explained he was borrowing to cover his living expenses and that the pattern of lending with should’ve led to Zopa verifying his circumstances and declining his applications. As Mr L asked to appeal, his complaint has been passed to me to make a decision. 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 lend, the rules say Zopa had to complete reasonable and proportionate checks to ensure Mr L could afford to repay the debt in a sustainable way. These affordability checks needed to be focused on the borrower’s circumstances. The nature of what’s considered reasonable and proportionate will vary depending on various factors like: - The amount of credit; - The total sum repayable and the size of regular repayments; - The duration of the agreement; - The costs of the credit; and - The consumer’s individual circumstances. That means there’s no set list of checks a lender must complete. But lenders are required to consider the above points when deciding what’s reasonable and proportionate. Lenders may choose to verify a borrower’s income or obtain a more detailed picture of their circumstances by reviewing bank statements for example. More information about how we consider irresponsible lending complaints can be found on our website. When Mr L applied for loan 1 he said he was renting privately and had an annual income of £29,000. Zopa used credit reference agency data to help verify the income figure Mr L provided. As the income figure Mr L gave was verified by Zopa’s third party check I’m satisfied it was reasonable for it to be used in the application. The credit search Zopa completed for loan 1 showed Mr L had a low level of unsecured debt with a total outstanding balance of £1,669. All Mr L’s accounts were up to date and there was no adverse credit. I didn’t see anything I’d have expected Zopa to take as a sign Mr L was struggling financially. I can see Mr L’s existing repayments were factored into Zopa’s affordability assessment. The affordability assessment took Mr L’s income and regular outgoings into account. I can see Zopa took Mr L’s existing debt repayments and also applied estimates for his rent and general living expenses based on statistical data. I’m satisfied that was a reasonable approach in the circumstances of Mr L’s application and in line with the relevant lending rules. The affordability assessment reached the conclusion Mr L had a disposable income of around £1,400 a month. I’m satisfied that would’ve been sufficient to meet the new loan payments without causing strain. In my view, the lending checks completed by Zopa were proportionate to the amount and type of credit it went on to approve. And I’m satisfied the decision to approve Mr L’s application was reasonable based on the information Zopa obtained. As a result, I haven’t been persuaded Zopa lent irresponsibly when it approved loan 1. Mr L applied to refinance loan 1 into loan 2 in October 2021. I’ve checked Mr L’s payment history for loan 1 and can see that the payment date was amended. But Mr L’s payments were all made without any arrears. In the application for loan 2 Mr L confirmed he was still employed full time and gave an annual income of £28,000. Zopa’s explained it used credit reference agency data to corroborate Mr L’s income figure. I appreciate Mr L’s told us he

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wasn’t working at the time and was a fulltime student. But as an external party helped verify the income figure he provided, I think it was reasonable for Zopa to use it when considering whether to lend. To explain further, the credit reference agencies offer a service that monitors current account turnover. That is used, in part, to verify whether an income figure is accurate. It’s possible that the receipt of student loan payments and other transfers into Mr L’s account made it appear that the turnover was in line with the income he gave. I also think it’s fair to note that whilst Mr L has explained he wasn’t working at the point of application, that’s not what Zopa was told. The application is clear in confirming Mr L was working full time. I haven’t seen information that suggests it was unreasonable for Zopa to rely on the income details it went on to verify and use. Mr L also said he owned his property without a mortgage for the applications he made for loans 2 and 3. Mr L has explained he was renting throughout. But given both applications contained the same information about his residential status, I’m satisfied Zopa was told he owned an unencumbered property. On that basis, Zopa made no deductions for Mr L’s housing costs when completing its affordability assessment. Again, I haven’t seen anything that persuades me Zopa acted unfairly or unreasonably by taking Mr L’s residential status from the information he gave in the applications. The credit file results for loan 2 include Mr L’s existing Zopa loan with a balance of £9,225. Mr L also had other unsecured debts that totalled £2,469. No new adverse credit or missed payments were recorded on Mr L’s credit file. I can see the cost of servicing Mr L’s existing debts were considered by Zopa when completing its affordability assessment. Zopa’s affordability assessment for loan 2 used Mr L’s income and made deductions for his general living expenses and existing debts. As noted above, no housing costs were included. The end result was that Zopa says Mr L had a disposable income of around £1,200 a month after his outgoings were met. In my opinion, that was a reasonable conclusion following proportionate checks by Zopa. I can see that by approving loan 2, Mr L’s monthly loan payments increased by £180.56 to £397.30. Overall, I’m satisfied the information obtained by Zopa showed Mr L was able to sustainably afford the increase in his repayments. I haven’t been persuaded Zopa lent irresponsibly when it approved loan 2. Mr L’s payments for loan 2 were all made in the run up to his application for loan 3. In this application, Mr L said he was employed with an annual income of £35,000 that was verified in the same way by Zopa. Again, I haven’t seen anything that suggests it was unreasonable for Zopa to rely on the income figure provided. Mr L confirmed his residential status as an unencumbered owner so no housing costs were included in the affordability assessment. The credit file results showed no new adverse credit or missed payments. Loan 2 was recorded with a balance of £13,758. Other debts totalling £4,704 were also noted on Mr L’s credit file. I understand Mr L’s unsecured debt levels had increased. But I think it’s fair to note the reason for loan 3 was given as “consolidation” in the application. So there was some expectation Mr L would repay some of his other unsecured credit with the funds from loan 3. Whilst I note the increase in Mr L’s unsecured debts, I think the overall level was consistent with his circumstances. And I’m satisfied the monthly repayments were factored into Zopa’s affordability assessment. The affordability assessment took Mr L’s income and general living expenses into account along with his existing repayments (including the payment for loan 2). Zopa reached the view Mr L had a disposable income of £1,652 a month after his existing outgoings were met. I’m satisfied that would’ve been sufficient to sustainably maintain the new repayments of £224.01 a month. Having considered the available evidence, I think Zopa completed

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proportionate checks before approving loan 3. And I’m satisfied the decision to lend was reasonable based on the information obtained by Zopa. I’m very sorry to disappoint Mr L but I haven’t been persuaded Zopa lent irresponsibly when it approved his application for loan 3. I can see Mr L has provided bank statements from the periods before the loans were approved to help show his circumstances at the time. But, as I’ve set out above, I haven’t found grounds to say Zopa needed to go further in terms of its lending checks, like reviewing Mr L’s bank statements. As I haven’t been persuaded Zopa failed to complete proportionate checks I’m unable to say it acted unfairly by failing to check his bank statements. I’ve considered whether the business acted unfairly or unreasonably in any other way including whether the relationship might have been unfair under Section 140A of the Consumer Credit Act 1974. However, for the reasons I’ve already given, I don’t think Zopa lent irresponsibly to Mr L or otherwise treated him unfairly. I haven’t seen anything to suggest that Section 140A or anything else would, given the facts of this complaint, lead to a different outcome here. My final decision My decision is that I don’t uphold Mr L’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr L to accept or reject my decision before 16 April 2026. Marco Manente Ombudsman

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