Affordability complaint after credit default

Legal position:
Under the law of England and Wales, governed by the Financial Conduct Authority's rules in the Consumer Credit sourcebook (CONC), lenders are required to carry out proper affordability assessments before providing credit, such as loans or credit cards. This means they must check that you can reasonably afford to repay the credit without undue difficulty, taking into account your income, expenditure, and other financial commitments. If a lender fails in this duty, it may amount to irresponsible lending, and you could have grounds for a complaint.

Defaulting on the credit does not automatically prevent you from making such a complaint. In fact, complaints can often be raised after default, and successful ones may result in compensation, such as a reduction in the outstanding balance, interest refunds, or even the debt being written off in some cases. However, time limits apply: you generally have six years from the date the credit was provided (or from when the irresponsible lending occurred) to complain, or three years from when you became aware (or should reasonably have become aware) that you had grounds for complaint, whichever is later. These limits are set out in the Limitation Act 1980 and FCA guidance.

Note that the outcome depends on specific facts, such as the type of credit, the lender's assessment process, your financial circumstances at the time, and any evidence of harm caused by the lending. Recent regulatory focus, including FCA guidance updated in 2021 and ongoing, has emphasised fair treatment in cases of unaffordable lending, particularly for vulnerable consumers, but each case is assessed individually.

Practical considerations:
Making a complaint after default can be worthwhile, but it does not pause enforcement actions by the lender, such as debt collection or court proceedings, unless agreed otherwise. You should be aware of potential costs if the complaint fails and you pursue it further, though the Financial Ombudsman Service (FOS) process is free to consumers. Success rates vary; FOS data shows that around 30-40% of affordability complaints are upheld, depending on the evidence.

If your complaint relates to a jurisdiction outside England and Wales, I must note that this advice is tailored to that area; for other locations, you may wish to consult our worldwide service, Atlas.

Next steps:
To proceed effectively, consider the following in order:

1. Gather evidence: Collect documents such as credit agreements, statements showing repayments and defaults, your income and expenditure details from the time the credit was granted, and any correspondence with the lender.

2. Make a formal complaint to the lender: Write to them explaining why you believe the lending was unaffordable, referencing specific FCA rules like CONC 5.2A. They have eight weeks to respond.

3. If dissatisfied with their response (or if none is received), escalate to the Financial Ombudsman Service: This is free, and they can investigate independently. You must do this within six months of the lender's final response.

4. If the debt is being enforced, seek breathing space: Consider options like the Debt Respite Scheme (Breathing Space) for temporary protection from creditors while you address the complaint.

5. Only if necessary, consider court action: This is rarely the first step due to costs and risks, but if the complaint fails and you believe there is a strong case (e.g., for misrepresentation), you could explore a claim in the county court. However, this involves fees, evidence requirements, and potential adverse costs if unsuccessful.

If you provide more details, such as the type of credit, key dates, or the lender involved, I can offer more tailored guidance.