Valour Finance Limited · DRN-6273875

The complaint Mr M complains that Valour Finance Limited trading as Savvy.co.uk (“Valour”) has breached the regulatory cost cap which has been implemented for this type of lending. As a result, this created an unfair relationship. What happened The loan that Mr M has complained about was a £1,200 instalment loan granted in October 2023. Mr M was due to make 13, 4 weekly payments of £184.23. If Mr M repaid the loan in line with the credit agreement, he would repay a total of £2,394.99. Mr M had problems repaying the account and it was passed to third party debt collector in May 2024. In response to Mr M’s complaint, Valour said it had charged the interest that it said it would and which was outlined in the credit agreement. As such, it didn’t uphold his complaint. Mr M referred the complaint to the Financial Ombudsman. The complaint was considered by an Investigator, who didn’t uphold the complaint because they concluded the loan didn’t breach the cost cap set by the regulator because in total Valour was collecting less than 100% of the capital advanced. As a result, they also concluded the relationship wasn’t unfair. Mr M didn’t agree with the Investigator’s findings, and I’ve summarised his response below. • The critical protection provided to him is that the cost cap can’t exceed 100% of the amount borrowed. The total amount due under the agreement was close to the cost cap – at around 99.6% of the cap. Mr M says the cap isn’t a target to aim for. • The fact that the loan falls just under the cost cap doesn’t make it fair or within the spirit of the law. • The loan was structured to enable Valour to extract the maximum amount possible without ‘technically’ breaching the cap. • The loan created an unfair relationship due to its cost. • The loan was in Mr M’s words “unlawful” and the loan shouldn’t have been granted. • Valour also failed to conduct a proper affordability assessment and at the time of borrowing Mr M was vulnerable. • Mr M says the terms of refence allow the Financial Ombudsman to investigate the unaffordable lending complaint as well – under this complaint reference. As no agreement could be reached the complaint has been passed to me to decide. 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. I will firstly deal with what this final decision will cover. When Mr M initially complained to Valour at the end of 2025 his complaint was solely to do with the application of the cost cap and whether that created an unfair relationship.

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In response to the Investigator’s assessment, Mr M has also set out that he considers that sufficient affordability checks weren’t conducted before the loan was granted and neither did Valour pick up that he was vulnerable. This is in my view a new and substantive complaint point which Valour is entitled to review and investigate before the Financial Ombudsman is involved. Indeed, the review of whether it did sufficient checks is a completely separate and distinct issue compared to whether the cost cap has been correctly applied. As such, I am not going to be commenting on or investigating whether Valour ought to have granted the loan. If Mr M is unhappy with the lending decision, he is of course free to raise his concerns with Valour in the first instance to give it a chance to investigate and respond to the complaint. Then once either a final response has been issued or 8 weeks has passed he can, should he remain unhappy and subject to our jurisdiction refer that complaint to the Financial Ombudsman. To be clear, I am only looking at the issues Mr M raised about the application of the cost cap. I think it may help to provide some context around the cost cap and what it meant for the industry. From January 2015 the regulator implemented a cost cap to limit the amount of interest, fees and charges a lender can collect when a high-cost short term credit loan was granted. For the avoidance of doubt, Mr M’s loan from Valour meets the definition of a high- cost credit loan and so given the loan was granted in 2023, it is subject to the cost cap. Prior to January 2015, there was no set limit (or cap) on what a lender could charge a consumer when it lent these types of loans – should a lender wish it could’ve charged 200% of the amount lent and there wouldn’t necessarily have been anything wrong with that, As Mr M is aware that the cost cap contains three parts. 1. Interest and fees can’t exceed - 0.8% per day of the amount borrowed, 2. fixed default fees at £15 and 3. a borrower can’t repay more than 100% in interest fees and charges of the amount borrowed. Using Mr M’s agreement as an example – the credit agreement shows that Mr M borrowed £1,200 and so under the terms of the cost cap – the maximum amount Valour could collect from him could be as much as £2,400. The credit agreement sets out that Mr M’s total cost to repay is (assuming all payments were made as expected) was £2,394.99. Therefore, as Mr M has conceded , the cost cap hasn’t been breached by Valour. As such there has been no breach and so no error has been made by Valour with regards to the amount of interest, fees and charges it was going to collect. And that is the end of the complaint. The rest of my decision addresses Mr M’s arguments surrounding legislation and rules over which the Financial Ombudsman has no power to amend or change. I’ve noted that Mr M says the cap shouldn’t be a target for which lenders should aim for, but that is exactly why the cap was brought into place in the first instance because some lenders were charging significantly more than 100% of the amount borrowed, and the FCA said the cap limit was a happy medium, in the FCA’s chief executive officer’s own words at the time. “I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we risk not having a viable market, any higher and there would not be adequate protection for borrowers.”

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The FCA clearly felt that having a higher cap or allowing lenders to charge more would not provide enough protection to borrowers. As such, the cost of the loan while high, doesn’t breach any rules or guidance around the cap. I acknowledge that the loan may well have been structured in such a way in order to allow Valour to collect from Mr M a total cost that is almost equal to the maximum amount it was allowed to collect, under the cap. Indeed, it is likely this is the case, but that doesn’t mean Valour was wrong to do so, as it was complying with the cost cap implemented by the regulator. As such I can’t uphold the complaint solely because of the way Valour told to structure a loan – which Mr M agreed to take. This also means, that I can’t recommend any compensation because I can only do so in situation where I think a lender has made an error. While Mr M may feel the loan is expensive and has been unfairly structured, that alone isn’t enough to uphold his complaint. Even if Valour has since charged late fees bringing the balance up to a maximum amount to be repaid of £2,400 that also wouldn’t be an error due to the loan hitting the cost cap. A loan reaching the maximum allowed under the cost cap isn’t an error. While as I’ve said its expensive it hasn’t breached any of the rules or guidance. Mr M may well feel that is unfair but by doing so Valour hasn’t made an error – it was collecting close to the total amount the regulator has allowed them too, and this is key because I am only able to uphold a complaint about the cost cap, if the loan in question breached the cap but as this loan didn’t, Valour didn’t make an error with the application of interest. Finally, I’ve also considered whether the relationship might have been unfair under s.140A of the Consumer Credit Act 1974 in relation to this complaint. But as the cost of the loan was within the cap, I can’t see that there has been a regulatory failure in relation to this specific point. I haven’t seen anything to suggest that Section 140A would, given the facts of this complaint, lead to a different outcome here. My final decision So, for the reasons I’ve explained above, I’m not upholding Mr M’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 15 May 2026. Robert Walker Ombudsman

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