Zilch Technology Limited · DRN-6230208

Complaint Miss C has complained about a credit account Zilch Technology Limited (trading as “Zilch”) provided to her. She says the credit account was irresponsibly provided as she was in an Individual Voluntary Arrangement (“IVA”) at the time of her application, which meant that she couldn’t afford the payments. Background Zilch provided Miss C with a credit account with a limit of £200 in December 20211. It is my understanding that the limit on the credit account was never increased and that Miss C was never in a position where she would legitimately be able to owe more than £200. One of our investigators reviewed what Miss C and Zilch had told us. And she thought Zilch hadn’t done anything wrong or treated Miss C unfairly when providing the credit account. So she didn’t recommend that Miss C’s complaint be upheld. Miss C disagreed and asked for an ombudsman to look at the 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 C’s complaint. Having carefully considered everything, I’ve decided not to uphold Miss C’s complaint. I’ll explain why in a little more detail. Zilch needed to make sure it didn’t lend irresponsibly. In practice, what this means is Zilch needed to carry out proportionate checks to be able to understand whether Miss C could afford to repay any credit it provided. 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 1 Zilch has said that while the account was provided in December 2021, Miss C didn’t start using it until May 2023. The credit report extract Miss C has provided us with appears to support this being the case.

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a lender to be able to show that it didn’t continue to lend to a customer irresponsibly. Zilch says it initially agreed to Miss C’s application after it obtained information to satisfy it that Miss C would be able to make the low monthly repayments due for this credit account. On the other hand, Miss C says that she shouldn’t have been lent to as she was in a poor financial position. I’ve considered what the parties have said. What’s important to note is that Miss C was provided with a revolving credit facility rather than a loan. This means that Zilch was required to understand whether a credit limit of £200 could be repaid within a reasonable period of time, rather than all in one go. And I think it’s fair to say that a credit limit of £200 will have required relatively low monthly payments in order to clear the full amount that could have been owed within a reasonable period of time. Zilch has said that its checks indicated that this credit account was affordable for Miss C. However, while Zilch says that it believes that this account was affordable for Miss C and this is why it accepted her application, it has provided literally zilch on what it actually learned about Miss C and more importantly why what it obtained meant that it was fair and reasonable for it to accept her application. Without any explanation of what Zilch obtained and why it believed this meant that Miss C could afford to repay what she could owe on this account within a reasonable period of time, I’m not in a position to accept that Zilch’s checks were reasonable and proportionate. In the absence of reasonable and proportionate having been evidenced here, I’ll now seek to recreate what such a check is more likely than not to have shown. Given Miss C was a new Zilch customer, I would have expected Zilch to have had an understanding of Miss C’s income and some idea of her credit history. Bearing in mind what this information demonstrated, this would then inform whether any further checks were necessary. For example, if Miss C had a low income or significant adverse information recorded against her, it may be reasonable to expect Zilch to have found out more about her living expenses before being able to say that this credit was affordable for her. I’ve considered the information Miss C has provided now with a view to recreating what reasonable and proportionate checks are more likely than not to have shown. While I’ve looked at the bank statements Miss C has provided in order to do this, I’ve done this because I’m having to retrospectively determine what a proportionate check is likely to have looked like at this late stage. And bank statements have all the information I now need to do this. However, I wish to make it clear that Zilch was not required to request and review Miss C’s bank statements prior to lending to her. From the information Miss C has provided, it looks like she was in receipt of regular funds. And the amount of funds that she was in receipt of wasn’t especially low or concerning. Nonetheless, Miss C has also provided evidence to show that she entered into an IVA in January 2018. It’s unclear whether Zilch was aware of Miss C’s IVA. It’s fair to say that this would reasonably be considered as significant adverse credit information. It’s unclear whether Zilch was aware of Miss C’s IVA. But even if it was, I don’t agree with Miss C that this in itself means that she shouldn’t have been lent to. I say this because Miss C entered into the IVA in January 2018 and she was applying for this credit account almost four years later in December 2021. Ultimately, it was up to Zilch to decide whether it wished to accept the credit risk of taking on Miss C as a customer provided it was reasonably entitled to believe that the credit was

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affordable and it reasonably mitigated the risk of harm to her going forward. Arguably Zilch did mitigate this risk by providing Miss C with such a low credit limit to begin with. Although I do think that the existence of an IVA means that it would have been prudent for Zilch to have had some idea of Miss C’s committed expenditure before it could reasonably consider that the credit account was affordable for her in these circumstances. Nonetheless, the bank statements Miss C has provided do appear to show that when her committed expenses are added to her IVA payments and existing credit commitments and then deducted from the funds going into her account, there were sufficient funds left over, at the time at least, for her to repay what she could owe on this account within a reasonable period of time. To be clear, my finding here isn’t that Miss C was in a good financial position, or that she was able to make monthly repayments of £200. These aren’t the questions I need to determine here - especially as Miss C was never required to make such payments to Zilch. My finding here is that the information in Miss C’s statements show that reasonable and proportionate checks would more likely than not have shown that she would have been able to repay £200 within a reasonable period of time, at the time of her application for this account. In these circumstances, I’m satisfied that proportionate checks would more likely than not have led Zilch to consider that this credit account was affordable for Miss C. The information provided now suggests that the low monthly repayment that would be required to clear the balance on the account, within a reasonable period of time, were affordable for Miss C. In reaching my conclusions, I’ve also considered whether the lending relationship between Zilch and Miss C might have been unfair to Miss C under section 140A of the Consumer Credit Act 1974 (“CCA”). However, for the reasons I’ve explained, I’ve not been persuaded that Zilch irresponsibly lent to Miss C or otherwise treated her unfairly in relation to this matter. And I haven’t seen anything to suggest that section 140A CCA or anything else would, given the facts of this complaint, lead to a different outcome here. Overall and having considered everything, while I can understand Miss C’s sentiments, I’m satisfied that proportionate checks won’t have prevented Zilch from providing this credit account to Miss C. So I don’t think that Zilch treated Miss C unfairly or unreasonably and I’m not upholding this complaint. I appreciate this will be very disappointing for Miss C. But I hope she’ll understand the reasons for my decision and that she’ll at least feel her concerns have been listened to. Although I’m not upholding Miss C’s complaint, I would remind Zilch of its continuing obligation to exercise forbearance and due consideration, given what Miss C has said about her current situation and her ability to continue making payments. I would also encourage Miss C to get in contact with and co-operate with any steps that may be needed to review what she might, if anything, be able to repay going forward. Miss C may be able to complain to us – subject to any jurisdiction concerns – should she be unhappy with Zilch’s actions in relation to collecting the balance remaining on the account. My final decision For the reasons I’ve explained, I’m not upholding Miss C’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss C to accept

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or reject my decision before 17 April 2026. Jeshen Narayanan Ombudsman

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