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i This advice applies to people living in England, Wales, Scotland and Northern Ireland

Irresponsible lending and affordability checks

When you apply for credit, lenders should do an affordability check to make sure you can afford what you are borrowing. When lenders ignore or do not do these checks, it is called irresponsible lending. You can make a complaint if you think this has happened to you.

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  1. What is irresponsible lending?
  2. What is an affordability check?
  3. What should I do if I have been refused credit after an affordability check?
  4. What happens if I give the wrong information to a lender?
  5. Can I report irresponsible lending?
  6. Can I sue my lender and get compensation for irresponsible lending?
  7. What else can I do if I am struggling with debt?

What is irresponsible lending?

Irresponsible lending is when a lender gives credit to a borrower without checking if they can afford to pay it back.

When a lender does not check what you can afford, they risk giving you more credit than you need or lending you more money than you can afford to pay back.

Victims of irresponsible lending may need to cut back on essential living costs to keep up with payments to their debt. Or they may fall behind on payments, causing their account to default.

Responsible lenders will make sure that:


  • You can afford to pay the debt in full and on time
  • You do not have to borrow more money to afford living costs
  • You are not at risk of falling behind on your bills because of the debt
  • They are not causing you financial hardship

You have the right to complain to your lender if they gave you credit irresponsibly and you are now struggling financially as a result.

Many payday loan companies have had to refund or write off debts because of irresponsible lending.

What is an affordability check?

An affordability check is what lenders do to make sure you can afford to borrow the amount you are asking for.

Any lender regulated by the Consumer Credit Act must complete these checks.

They will usually start by asking you about your household budget. They will look at your income, regular bills and your spending needs.

They will also check your credit file for details of your debts.

Lenders will work out how much you can afford by checking:


  • Your income and spending
  • How much money you have left over after bills and living costs
  • If you can afford to pay the regular payment to the debt

Lenders should take these same steps when they extend a credit agreement or refinance an agreement.

When a borrower applies for a guarantor loan, the lender must do an affordability check for both the main borrower and the guarantor.

What should I do if I have been refused credit after an affordability check?

It is frustrating when an affordability check stops you getting credit. But it is important to understand that borrowing this money could have put you in financial hardship.

Ask yourself the following questions:


  • Do you really need to borrow more?
  • Will you find it hard to manage without borrowing money?
  • Are you struggling with any other debts?

If the answer to any of these questions is yes, it could be a sign that you need debt advice.

What happens if I give wrong information to a lender?

When you are going through an affordability check, you must be as truthful and accurate as possible. Things can quickly spiral out of control if you borrow more than you can afford.

Giving wrong information can:


  • Lead to your affordability complaint being refused. If you make a complaint about irresponsible lending, the lender might say you have them bad information. But you can argue that they should have asked for more detail, like bank statements or wage slips
  • Cause problems next time you apply for credit. Some lenders use a fraud prevention service called National Hunter. It flags up differences on previous application forms

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Can I report irresponsible lending?

If you think you are a victim of irresponsible lending, the first thing to do is contact the lender and raise an affordability complaint.

You will need to explain the reasons why you believe the credit was given to you irresponsibly and how the situation caused you to fall into financial hardship.

If the lender does not uphold your complaint, or does not acknowledge it, you can escalate your complaint to the Financial Ombudsman Service.

Read more about making complaints to creditors.

Most creditors will do the appropriate checks before lending. We only recommend complaining if you are confident that you have been a victim of irresponsible lending.

Can I sue my lender and get compensation for irresponsible lending?

There are ways to take legal action against your lenders for irresponsible lending, but we do not recommend going down this path.

Taking legal action can cost a lot of money and be risky. You are not guaranteed to win the legal battle against your lender. If you lose, you could find yourself with no compensation and legal fees on top to pay.

Also, if you find that you are already in financial hardship, you risk making your situation worse.

We recommend getting free and impartial debt advice instead.

What else can I do if I am struggling with debt?

With the support of our helpful advisors, you can find a way to deal with your debt that works for your situation.

We can help you take control of your finances with our free online debt advice tool. You can start, pause and pick up again at any time, with no impact to your credit score.

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