Shop Direct Finance Company Limited · DRN-6207724

Complaint Miss J has complained that Shop Direct Finance Company Limited (“Shop Direct”) irresponsibly provided her with five catalogue shopping accounts which it then increased her credit limit on, in circumstances where she couldn’t afford it. Background This complaint was initially about five catalogue shopping accounts that Shop Direct provided to Miss J in April 2016, September 2018, January 2022, April 2022 and August 2023. However, in 2019, Shop Direct decided not to pursue outstanding balances that exceeded the total amount of interest, fees and charges added on the first two accounts. As this is more than what we’d require a firm to do in the event that we were to uphold a complaint, we’ve not looked into Miss J’s complaint about her first two accounts. The account history on Miss J’s remaining three accounts is as follows: Account A January 2022 – Account opened with a credit limit of £300 July 2022 – limit increased to £800 October 2023 – limit increased to £1,000.00 March 2024 – limit increased to £1,600.00 Account B April 2022 – Account opened with a credit limit of £400 Account C August 2023 – Account opened with a credit limit of £500 Miss J never used account C and while she did use account B, she repaid the balance in full prior to any interest, fees and charges being added. I’m therefore satisfied that Miss S cannot have lost out as a result of account B or account C having been provided to her. As this is the case, I’ve only looked at the decisions to provide account A and the limit increases on it, although where relevant I’ve kept in mind that there was the possibility that Miss J could have owed a balance on all three accounts. One of our investigators looked at everything provided and did not think that proportionate checks would have shown Shop Direct that it shouldn’t have provided Miss J with account A or the credit limit increases on it. So he didn’t think that Miss J’s complaint should be upheld. Miss J disagreed with our investigator’s conclusions and asked for an ombudsman to review her complaint.

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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 set out our general approach to complaints about unaffordable and irresponsible lending - including the key relevant rules, guidance and good industry practice - on our website. Having carefully considered everything, I’ve decided not to uphold Miss J’s complaint. I’ll explain why in a little more detail. Shop Direct needed to take reasonable steps to ensure that it didn’t lend irresponsibly. In practice this means that it should have carried out proportionate checks to make sure Miss J could afford to repay what she was being lent in a sustainable manner. These checks could take into account a number of different things, such as how much was being lent, the repayment amounts and the consumer’s income and expenditure. With this in mind, in the early stages of a lending relationship, I think less thorough checks might be reasonable and proportionate. But certain factors might point to the fact that Shop Direct should fairly and reasonably have done more to establish that any lending was sustainable for the consumer. These factors include: • the lower a consumer’s income (reflecting that it could be more difficult to make any loan repayments to a given loan amount from a lower level of income); • the higher the amount due to be repaid (reflecting that it could be more difficult to meet a higher repayment from a particular level of income); • the greater the frequency of borrowing, and the longer the period of time during which a customer has been indebted (reflecting the risk that prolonged indebtedness may signal that the borrowing had become, or was becoming, unsustainable). There may even come a point where the lending history and pattern of lending itself clearly demonstrates that the lending was unsustainable. I’ve kept all of this in mind when deciding Miss J’s complaint. The catalogue shopping account which Shop Direct provided to Miss J were revolving credit facilities. This meant that Shop Direct was required to understand whether Miss J could repay £300, £1,200.001, £2,700.002 and £2,500.003 within a reasonable period of time. Shop Direct carried out a credit check before initially agreeing to provide account A, which it has provided the headline details of. This showed that Miss J had external credit of around £400 at the time of the application which was being relatively well maintained. Miss J also appears to have had no recent significant adverse information – such as defaulted accounts or county court judgments (“CCJ”) - recorded against her. 1 By this stage, Miss J had account B. Although she didn’t end up paying interest on this account, she could have ended up owing this amount. 2 By this stage Miss J also had account B and account C. Although she didn’t use account C and didn’t end up paying interest on account B, she could have ended up owing this amount. 3 By this stage Miss J also had account B and account C. Although she didn’t use account C and didn’t end up paying interest on account B, she could have ended up owing this amount.

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I’ve said that the credit check appeared to show that Miss J didn’t have any recent significant adverse information as Miss J has said that Shop Direct ought to have been aware that it had already defaulted the two previous accounts that she’d had with it. Furthermore, in addition to default these accounts, it also decided not to pursue balances on them as a result of Miss J’s personal circumstances. Miss J argues that Shop Direct unfairly failed to take this into account when it agreed to provide her with the later credit it did. I’ve considered what Miss J has said. And as I’ve explained in the background section of this final decision, there is no dispute that Shop Direct decided not to pursue balances on two catalogue shopping accounts that Miss J previously had. I’m also satisfied that Shop Direct took this action because of what Miss J had said about her circumstances at this time. I can understand why Miss J may find it strange that Shop Direct was prepared to lend to her when it had already written off the balances on two accounts. However, Shop Direct says it didn’t link Miss J’s application for her later accounts to the ones with balances that had been written off until she made her complaint. Having looked at the information provided, it appears though by the time Miss J had made the application for account A her name had changed. Furthermore, Miss J had moved so had a different correspondence address and telephone number from the one that she’d used on her previous applications. It also appears that Miss J had a different email address too. Shop Direct has said that the number of differences in the details used in these applications resulted in Miss J’s application for account A not being linked to her previous accounts. Given there was little in common between the details Miss J used for account A and the details on the accounts previously written off and I can’t see that the credit checks highlighted them either, I don’t think that it was unreasonable for Shop Direct not to have picked up that Miss J had previous accounts at the time of the application for account A. So while I’m sorry to hear about Miss J’s difficulties and the fact that this led to previous accounts being written off, I don’t think that this in itself means that Shope Direct shouldn’t have provided account A to her. I’ve therefore gone on to consider whether Shop Direct was reasonably entitled to conclude that account A and the associated credit limit increases were affordable for her. I accept that Miss J may dispute this. However, what is important to note is that credit limits of £300, £1,200.00, £2,700.00 and £2,500.00 didn’t require especially large monthly payments in order to clear the full amount that could be owed within a reasonable period of time. And given Miss J’s declared income as well as what the credit searches showed, I think that Shop Direct was reasonably entitled to conclude that Miss J did have the funds to make the monthly payment required for such credit limits. I note that Miss J has said that she often only made minimum repayments and this was a reason not to increase her credit limit. While it’s fair to say that there were times when Miss J did only make the minimum payment that she was required to on the account, it would be incorrect to say that she always only ever made the minimum payment. Indeed, in considering whether it was fair and reasonable for Shop Direct to have offered the limit increases, I’m mindful that in the 28-month period between March 2022 (which was the month Miss J made her first payment on this account) and June 2024 (which was the month before Miss J was offered the final limit increase), Miss J made monthly payments that totalled just under £2,200.00. Bearing in mind Miss J managed to make payments totalling this much in twenty-eight months, it is extremely difficult for me to say that Miss J’s repayment record in itself didn’t

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suggest that she could repay £1,600.00 (or even £2,500.00 when considering what could also be owed on account B and account C) within a reasonable period of time. After all, she made repayments in excess of the highest credit limit (on this account) in just over two years. This is important as Shop Direct was entitled to rely on Miss J’s repayment record on this account when deciding whether to increase her credit limit. For the sake of completeness and in any event, I’m not persuaded that Shop Direct carrying out further checks would have led to it deciding against offering this credit either. I say this because at the absolute most, it could be argued that Shop Direct ought to have found out more about Miss J’s actual living costs before providing the limit increases. However, having looked at the information Miss J has provided, I can’t see that her committed non-credit related expenditure meant that she wouldn’t be able to make the repayments that she could have had to make had she used the extra credit offered. Furthermore, while Miss J is unhappy that the benefits she was in receipt of have been included as income, these were funds that she was receiving. Equally the use of these funds was not restricted. It should also be kept in mind that Miss J was being provided with an account to purchase goods, some of which may have been for her children too. I’d also add that there isn’t a prohibition on lending to a prospective borrower whose income is made up of benefits either. Indeed, an approach of automatically declining an application from an individual in receipt of benefits would be arbitrary and is unlikely to have been fair and reasonable in all the circumstances. In reaching my conclusions, I’ve also considered whether the lending relationship between Shop Direct and Miss J might have been unfair to Miss J under section 140A of the Consumer Credit Act 1974 (“CCA”). However, for the reasons I’ve explained, I’ve not been persuaded that Shop Direct irresponsibly lent to Miss J 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 carefully considered everything, I’m satisfied that reasonable and proportionate checks won’t have prevented Shop Direct from providing account A or the limit increases to Miss J. Furthermore, as Shop Direct wrote off amounts that exceeded interest, fees and charges added on Miss J’s first two accounts and Miss J didn’t pay any interest on account B or account C, I’m satisfied that she didn’t lose out as a result of her other accounts either. In these circumstances, while it’s clear that Miss J has been through a difficult time and I sympathise with everything she’s said, I nonetheless don’t think that Shop Direct has acted unfairly or unreasonably towards her. So I’m not upholding this complaint. I appreciate this will be very disappointing for Miss J. 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 For the reasons I’ve explained, I’m not upholding this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss J to accept or reject my decision before 8 April 2026.

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Jeshen Narayanan Ombudsman

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