Mobile Money Limited · DRN-3932837

Complaint Miss N has complained about logbook loans Mobile Money Limited (“Mobile Money”) provided to her. She says she was already in a cycle of debt and that it was too easy to get top up loans. Background Mobile Money provided Miss M with four logbook loans in total. The first of which was for £1,000.00 and taken in December 2015. This loan was due to be repaid in 12 monthly instalments of £118.90. Loan 1 was settled in full after Miss M made three monthly instalments. Miss M was then provided with a second logbook loan in October 2017, which was 19 months after loan 1 had been settled. This was a loan for £2,500.00 and was due to be repaid in 18 monthly instalments of £229.88 per month. Loan 2 was settled early with some of the proceeds from loan 3 which Mobile Money provided in May 2018. Loan 3 was for a total of £2,759.78, £800 of which was further funds advanced to Miss M and £1,959.78 went towards settling the outstanding balance on loan 2, and was due to be repaid in 18 monthly instalments of £253.77. Loan 3 was settled early with some of the proceeds of loan 4 which Mobile Money provided in October 2018. Loan 4 was for a total of £5,072.07, £3,000 of which was further funds advanced to Miss M and £2,072.07 went towards settling the outstanding balance on loan 3, and was due to be repaid in 36 monthly instalments of £287.72. We’ve already explained why we’re unable to look at Miss M’s complaint about loan 1. And we’ve only looked at Miss M’s complaint about loans 2 to 4. One of our adjudicators reviewed what Miss N and Mobile Money had told us. And he thought that he hadn’t been provided with enough information to demonstrate that proportionate checks would have prevented Mobile Money from providing loans 2 to 4 Miss M. So he didn’t uphold Miss N’s complaint. Miss N disagreed and asked for an ombudsman to look at her complaint. My findings I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. We’ve explained how we handle complaints about unaffordable and irresponsible lending on our website. And I’ve used this approach to help me decide Miss N’s complaint. Having carefully considered everything, I’ve decided not to uphold Miss N’s complaint. I’ll explain why in a little more detail.

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Mobile Money needed to make sure that it didn’t lend irresponsibly. In practice, what this means is Mobile Money needed to carry out proportionate checks to be able to understand whether Miss N could afford to repay before providing these loans. Our website sets out what we typically think about when deciding whether a lender’s checks were proportionate. Generally, we think it’s reasonable for a lender’s checks to be less thorough – in terms of how much information it gathers and what it does to verify it – in the early stages of a lending relationship. But we might think it needed to do more if, for example, a borrower’s income was low or the amount lent was high. And the longer the lending relationship goes on, the greater the risk of it becoming unsustainable and the borrower experiencing financial difficulty. So we’d expect a lender to be able to show that it didn’t continue to lend to a customer irresponsibly. Mobile Money provided Miss N with logbook loans for £2,000.00 in October 2017, £2,759.78 in May 2018 and £5,072.07 in October 2018. Loans 2 and 3 were due to be repaid in 18 instalments and loan 4 had a 36-month term. Mobile Money says it agreed to Miss N’s applications after she provided details of her monthly income and expenditure. It says it cross-checked this against information on a soft credit search it carried out on Miss N and payslips that it asked her to provide to evidence her income. In its view, the income and expenditure information obtained showed that Miss N would be able to make the repayments she was committing to. Mobile Money says, in these circumstances it was reasonable to lend to Miss N on each occasion. On the other hand, Miss N has said she was in cycle of debt and that these loans worsened her position. I’ve carefully thought about what Miss N and Mobile Money have said. The first thing for me to say is that Mobile Money did carry out external checks and didn’t simply rely on what it was told. It carried out credit checks which showed Miss M’s total indebtedness was reasonable compared to her income on each occasion and having looked at the credit checks I can’t see anything on them to indicate that Miss N had previously had significant difficulties repaying credit. It looks like Miss N was asked to provide copies of payslips and she confirmed that she was living at home with parents and paid around £150 a month in board and bill contributions. So at face value, at least, the monthly repayments for all of these loans did appear affordable. That said, bearing in mind Miss M was provided with three loans in a relatively short period of time and Miss M had missed some credit card payments in the past, I do think that it would have been proportionate for Mobile Money to have taken further steps to obtain some more detailed information on Miss M’s living costs. In my view, Mobile Money needed to get a better understanding of why Miss M was taking out this many loans despite having a reasonable amount of disposable income each month. Where a firm failed to carry out reasonable and proportionate checks before arranging a loan or loans, I’d usually go on to recreate reasonable and proportionate checks in order to get an indication of what such checks would more likely than not have shown. However, Miss M hasn’t provided us with the information we’ve asked her for in order to be able to assess what her circumstances were like at the time she applied for the loans. And without this information I’m simply unable to ascertain whether proportionate checks would have prevented Mobile Money from lending to her.

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Furthermore, bearing in mind the amount of the monthly repayments in relation to her Miss M’s income and the fact that she managed to repay the loans, I can’t reasonably conclude that the loans in themselves were demonstrably unaffordable, notwithstanding being unable to recreate what proportionate checks are likely to have shown. Finally, I’ve also considered whether Mobile Money ought reasonably to have realised that it was increasing Miss M’s indebtedness in a way that was unsustainable or otherwise harmful. Miss M says that it was too easy to get top-ups to her loans and that her cycle of debt was made worse by this. However, loan 1 was settled very quickly. And it was over a year and a half before Miss M was provided with loan 2. So I don’t think loan 1 is a relevant consideration in relation to this matter, as I don’t think that Miss M could possibly have taken loan 2 to cover any possible hole left in her finances by loan 1. And while additional funds were advanced at the times loans 3 and 4 were provided, I’m mindful that the credit checks provided didn’t suggest that Miss M’s external indebtedness was increasing. Furthermore, Miss M only ended up owing Mobile Money for a total period of 48 months – in circumstances where her final loan had a 36-month term and her monthly repayments for loan 4 weren’t that much higher either. I’ve also noted that a further application for a loan was turned down in April 2019. The information on file suggests that this was because Miss M’s external indebtedness had increased in the period since loan 4 was provided. So while I think that there were some warning signs to be noted as a result of the applications for loans 3 and 4, it seems to me that Mobile Money heeded them and correctly refused Miss M’s application for a fifth loan in April 2019 and she ended up repaying loan 4 on time and in line with the original schedule. As this is the case, I’m satisfied that Mobile Money didn’t increase Miss M’s indebtedness in a way that unsustainable or otherwise harmful. I accept Miss N’s actual circumstances at the time might have been worse than she let on. And I know that her debts elsewhere increased after she was provided with loan 4. But the key here is that it’s only fair and reasonable for me to uphold a complaint in circumstances where a lender did something wrong. And without anything which clearly demonstrates that proportionate checks would have shown Miss N’s loans to have been unaffordable, I’m simply not in a position to find that this was the case here. So overall, I’ve not been persuaded that Mobile Money did anything wrong in deciding to lend to Miss N. I’ve not been persuaded that reasonable and proportionate checks would have shown the loans to have been individually unaffordable. And loans 3 and 4 were provided in circumstances where Miss N’s indebtedness didn’t appear to be increasing unsustainably. As this is the case, I’m not upholding this complaint. I appreciate this will be very disappointing for Miss N. But I hope she’ll understand the reasons for my decision and that she’ll at least feel her concerns have been listened to. My final decision My final decision is that I’m not upholding Miss N’s complaint.

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Under the rules of the Financial Ombudsman Service, I’m required to ask Miss M to accept or reject my decision before 10 March 2023. Jeshen Narayanan Ombudsman

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