In assessing Liam’s application, the bank looked at his income, debts, expenses and credit history. It assessed his ability to repay the loan based on his existing income only, and explicitly excluded any possible future income from the franchise business. This assessment showed his application met the bank's lending criteria. Over the following two years, Liam failed numerous times to meet his repayment obligations, and in mid-2021 the bank made several demands for payment of the outstanding debt.

Liam complained to us that the bank did not follow the correct procedure in assessing his loan application and failed to fulfil its obligations under the responsible lending code when it approved the lending. He further said that the bank should have made enquiries into the commercial viability of the franchise business.

Our investigation

Liam’s application was for a business loan, and so the Credit Contracts and Consumer Finance Act 2003 did not apply. Rather, the bank’s obligation was limited to satisfying itself that Liam was able to meet the terms of the lending, namely, that he could afford the repayments. We considered the bank, in making enquiries into his income, debts, expenses and credit history, had done exactly that. The bank had therefore not breached any duty or obligation to Liam.

Outcome

We did not uphold Liam’s complaint.