DRN-6295919

The complaint Mr W complains that Santander UK Plc (Santander) lent to him irresponsibly by providing a credit card without having made sufficient affordability checks. What happened Mr W applied for and was granted the following credit card by Santander: Date Event Credit Limit November 2024 Account Opened £3,800 In summary, Mr W complains that Santander lent to him irresponsibly by failing to perform sufficient affordability checks before issuing him a credit card. He says if Santander had performed adequate checks they would have seen he was already heavily indebted. Mr W says there were clear signs of financial stress and heavy reliance on credit at the point of lending such that further lending should not have been offered. Mr W complained to Santander in February 2026 who investigated his concerns but didn’t uphold his complaint. In their Final Response Letter dated 6th March 2026 Santander say they assess a customer’s financial situation, as well as considering affordability using a combination of data sources. Santander say based on the information provided by Mr W and the checks carried out, there was no reason to believe the account would be unaffordable. Mr W disagreed and brought the matter to this service in March 2026. An investigator considered the available evidence and merits of the case. In his view, the checks performed by Santander had been reasonable and appropriate for the lending. He also said that Mr W would have sufficient disposable income that the lending could likely be afforded. Having considered the evidence, I reached a different conclusion to the investigator, so issued a provisional decision. An extract follows and forms part of this final decision. As both parties have now replied to the provisional decision, this allows me to issue a Final Decision now. 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. Extract from my Provisional Decision When Mr W applied for the credit card, he declared a gross annual income of £27,453. He said he was employed full time in a call centre and disclosed four existing credit cards. He detailed combined monthly outgoings of £671

-- 1 of 5 --

Santander say they used this information and combined it with credit agency and Office of National Statistics (ONS) data when evaluating the application. On the evidence available to me I have not be able to confirm that Mr W’s salary or employment was verified beyond the application form. The credit file referenced by Santander showed some positive findings. There was no evidence of defaults, County Court Judgments (CCJ) or similar arrangements with creditors. It also showed Mr W had a total of £7,600 of unsecured debt. However, the credit file available to me is extremely high level, containing summary information rather than details such as the nature of that unsecured debt and when it was obtained. I am aware that the credit limit here is not very high. But given the existence of four other credit cards I would have expected the existence of payday loans to be clarified and the dates of applications for other credit to be of more interest when considering Mr W’s overall finances, even for a relatively small credit limit. Santander say they also considered ONS datasets and adjusted Mr W’s housing costs upwards from £200 to £220 estimating his remaining monthly outgoings. Mr W asks me to consider that his actual commitments at the time were far greater than revealed within the credit file. He says he had a salary deduction loan and a further loan not shown on his credit file. I am quite prepared to accept this was the case, but in fairness to Santander, I cannot expect a lender to make allowance for debts they couldn’t see on a credit file. Also, Mr W didn’t disclose these to Santander or include them in his monthly outgoings. I am aware that the credit limit here is only £4,000. Proportionate checks would therefore likely be less demanding than for a higher credit limit subject to the content of a credit report. Mr W asks me to consider whether the checks described were proportionate given his wider financial state. Having considered the case, I am minded to differ from the investigator and say they weren’t sufficient and Santander should have checked a little further. I say this because I have been unable to confirm that employment and income had been validated prior to lending. Also, the nature of the summary credit file doesn’t appear to give detail of the unsecured lending. Given Mr W’s salary, the fact that nearly half of his net income was already accounted for by living costs and the existence of four credit cards I think Santander should have done more than they did, I would also have expected the presence or otherwise of recent payday loans to have been established as well as excluding other patterns of recent borrowing. For these reasons, I am minded to say that the checks performed by Santander were not reasonable or proportionate for the lending. Having said I’m minded to find appropriate checks were not made, I must consider what proportionate checks would have revealed had they been made. For this I will rely on the current accounts provided by Mr W and used by both Santander and the investigator. These provide me with the best evidence of Mr W’s finances at the time and is consistent with the approach taken by Santander in asking for them when dealing with his initial complaint. Having checked these, I agree with the calculations of both Santander and the investigator and based on the methodology used by Santander (3.5% of the total balance for the new lending), Mr W would have a disposable income in the order of £177 per month. Santander allowed £133 per month for the new lending.

-- 2 of 5 --

However, Mr W asks me to consider whether too much emphasis has been placed on a zero percent introductory period when considering his repayments. He also asks me to consider whether repayment of 5% of the total balance is appropriate when considering sustainable repayments. I have recalculated the amount needed to sustainably repay the new borrowing based on FOS’s published approach to sustainable repayments. This assumes repayment of the full amount over a reasonable time. For a sum of £3,800 I have assumed 30 months. To allow for the potential skew of a 15 month zero percent offer, I have calculated a time weighed average interest rate of 14.9% across the 30 month period. Using this approach, the monthly payments needed to sustainably repay the new lending would be approximately £193 per month, sixty pounds per month more than under Santander’s methodology. Reducing the £177 disposable income agreed by Santander and the investigator by a further £60 would bring the level of disposable income down such that it is unlikely sustainable repayments would be made. Given the recalculated figures and what I have said above, I am minded to say that the lending decision was not fair and the credit should not have been offered. I would like to thank Santander for their focused response to my provisional decision and for the additional points I have been asked to take into account. I have given thought to both points raised by Santander and on a different case I might have been with them. On this case and evidence however, I am not minded to vary my provisional decision. I will respond briefly to the two areas where additional points have been raised. Spending on Mr W’s account as evidence of a lavish lifestyle I have been asked to reconsider the amount of credit already available to Mr W and the utilisation rate of his existing cards. It is suggested that this doesn’t suggest financial distress. I am also asked to consider the nature of spending made by Mr W after his credit card was opened. Santander fairly point out Mr W “maxed their £3.8k limit within 1 month of the account opening”. They say “The account behaviours don’t support reliance to the credit for essential spent but more likely for a lavish lifestyle meaning there is no indication of a financial distress with the transactions most made on the account.” The credit files I have seen and additional information provided by Santander do indeed show credit available on existing lines. But disposable income is by one measure modest and by another low already. So while I take Santander’s point, Mr W has limited capacity to increase his utilisation without reducing his disposable income to more concerning levels. Similarly, I understand the point Santander seeks to make about account spending. But, I think it would be unfair of me to consider transactional level spending after the account was opened when the same level of scrutiny was not applied (and would not have been appropriate) before it was opened. It is also spending available credit on an account which in my provisional decision I said should not have been made. The calculation of disposable income and its appropriateness for lending Again, I thank Santander for their additional materials explaining how they arrived at their calculations for new credit, including how they calculated a reasonable time for repayment. I have considered the relevant regulations and specifically (CONC 5.2A.27) along with our published approach.

-- 3 of 5 --

Santander point out their reasonable time to repay period is longer than mine (48 month v 30 months). They say this is in part due to the average term for Santander loans being 5 years and for Santander UK 48 months. I recognise this, but such an average would also include lending of significantly larger amounts. I am satisfied with the use of 30 months as a reasonable time to repay £3,800. This accounts for the difference in our disposable income figure calculations. I am then left with a figure which I think is unlikely to be sustainable without Mr W incurring additional lending. I will not detail that figure here as it relates to Santander’s acceptability criteria. I think it’s fair to say it’s a figure where Santander would be happy to extend lending and from their perspective it would be an offer compliant with their processes. I have a subtly different test. I must consider what is fair and reasonable in all the circumstances and part of that is to consider whether the residual figure is such that repayment is likely to be made without resorting to further lending. On this matter and on this evidence, I am not persuaded that is the case. So I still think the lending should not have been made. In reaching my conclusions, I’ve also considered whether the lending relationship between Mr W and Santander might have been unfair to Mr W under s140A of the Consumer Credit Act 1974. However, I’m satisfied that what I direct Santander to do in the section below results in fair compensation for Mr W given the overall circumstances of his/her complaint. For the reasons I’ve explained, I’m also satisfied that, based on what I’ve seen, no additional award is appropriate in this case. Putting things right As I don’t think Santander ought to have opened the account, I don’t think it’s fair for it to be able to charge any interest or charges under the credit agreement. But I think Mr W should pay back the amounts she has borrowed. Therefore, Santander should: • Rework the account removing all interest, fees, charges and insurances (not already refunded) that have been applied. • If the rework results in a credit balance, this should be refunded to Mr W along with simple interest at time-weighted average Bank of England base rate plus one percentage point* calculated from the date of each overpayment to the date of settlement. Santander should also remove all adverse information regarding this account from Mr W’s credit file. • Or, if after the rework there is still an outstanding balance, Santander should arrange an affordable repayment plan with Mr W for the remaining amount. Once Mr W has cleared the balance, any adverse information in relation to the account should be removed from the credit file. *HM Revenue & Customs requires Santander to deduct tax from any award of interest. It must give Mr W a certificate showing how much tax has been taken off if she asks for one. If it intends to apply the refund to reduce an outstanding balance, it must do so after deducting the tax. My final decision My final decision is that I uphold Mr W’s complaint against Santander UK Plc.

-- 4 of 5 --

Under the rules of the Financial Ombudsman Service, I’m required to ask Mr W to accept or reject my decision before 14 May 2026. Richard Bellamy Ombudsman

-- 5 of 5 --