Barclays Bank UK PLC · DRN-6256997

The complaint Mr S complains that Barclays Bank UK PLC trading as Tesco Bank lent irresponsibly when it increased the limit on his credit card. What happened The background to this complaint and my initial conclusions were set out in a provisional decision. I said: Mr S opened a Tesco Bank credit card in December 2017 with a limit of £3,400. Tesco Bank went on to increase the credit limit as follows: Event Date Limit App Dec-17 £3,400 CLI1 Dec-19 £4,400 CLI2 Jun-21 £6,400 CLI3 Jun-22 £8,400 CLR Apr-25 £7,750 More recently, Mr S complained that Tesco Bank lent irresponsibly when it approved the credit limit increase to £6,400 in June 2021 (CLI2) and £8,400 in June 2022 (CLI3). Tesco Bank issued a final response and said it carried out the relevant lending checks before approving both credit limit increases and didn’t agree it lent irresponsibly. An investigator at this service looked at Mr S’ complaint. They though Tesco Bank completed proportionate checks before approving both credit limit increases and that its decisions to proceed were reasonable based on the information it obtained. Mr S asked to appeal and said the reliance on the Current Account Turnover tool (CATO) to obtain an income figure wasn’t reasonable and didn’t reflect his actual earnings. Mr S also said Tesco Bank failed to identify financial fragility and should’ve seen he was caught in a cycle of debt with his balances increasing month on month. Mr S also said he’d paid excessive interest and Tesco Bank had failed to monitor his account for signs of persistent debt. As Mr S asked to appeal, his complaint has been passed to me to make a decision. What I’ve provisionally 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. Before agreeing to lend or increasing the credit limit, the rules say Tesco Bank had to complete reasonable and proportionate checks to ensure Mr S could afford to repay the debt in a sustainable way. These affordability checks needed to be focused on the borrower’s

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circumstances. The nature of what’s considered reasonable and proportionate will vary depending on various factors like: - The amount of credit; - The total sum repayable and the size of regular repayments; - The duration of the agreement; - The costs of the credit; and - The consumer’s individual circumstances. That means there’s no set list of checks a lender must complete. But lenders are required to consider the above points when deciding what’s reasonable and proportionate. Lenders may choose to verify a borrower’s income or obtain a more detailed picture of their circumstances by reviewing bank statements for example. More information about how we consider irresponsible lending complaints can be found on our website. I’ve thought carefully about whether I think Tesco Bank’s lending checks before approving the credit limit increases were proportionate. I’ll start by looking at CLI2, approved in June 2021. Whilst Mr S hasn’t complained about CLI1, I’ve taken the lending data Tesco Bank obtained along with the account history over the intervening 18 months into account. I’ve also taken information obtained from Mr S’ credit file into account. Tesco Bank has explained it uses CATO to verify a borrower’s income when deciding whether to lend. I can see that in December 2019 (when CLI1 was approved), Tesco Bank used CATO and it returned a net monthly income figure of £4,117. The credit search also found Mr S owed a total of £20,358 at the time. In June 2021, when looking at CLI2, the CATO results gave a monthly income of £2,835. The credit search showed Mr S’ overall debts had increased to £22,842. That means between CLI1 and CLI2 Tesco Bank found Mr S’ monthly income reduced by £1,282 and his unsecured debts had increased by almost £2,500. I think it’s fair to note that the last time Tesco Bank appears to have specifically asked Mr S about his circumstances and income was in December 2017 when he made the original application. And, given the drop in the CATO income level between CLI1 and CLI2 along with the increase in Mr S’ unsecured debt levels, I think it would’ve been proportionate for Tesco Bank to have taken a more detailed approach before deciding to lend further. I think a proportionate check should’ve involved getting a clearer picture of Mr S’ income and outgoings to ensure repayments were sustainable. One option Tesco Bank had would’ve been to review Mr S’ bank statements for the preceding months. I recently asked Mr S to supply copies of his bank statements for the three months before CLI2 was approved. I looked at Mr S’ regular income and found it averaged around £2,190 a month. I took regular outgoings for items like household bills, utilities, debt repayments, supermarket spending, fuel, transport, insurance and other regular expenses into account. I found Mr S’ regular outgoings came to an average of around £1,400 a month. That left around £790 after Mr S’ regular outgoings were met. In my view, that would’ve been sufficient to sustainably afford repayments to an increase in the credit limit of £2,000, taking it to £6,400. Even accepting Mr S took a new loan of £3,000 in May 2021, I think repayments to CLI2 would’ve been sustainable. Whilst I haven’t been persuaded the level of checks completed were proportionate, I think a more detailed approach from Tesco Bank, like reviewing Mr S’ bank statements, would’ve still led it to approve the credit limit increase to £6,400 in June 2021. I’m sorry to disappoint Mr S but I haven’t been persuaded Tesco Bank lent irresponsibly by approving CLI2.

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I’ve taken the same approach when looking at CLI3. The level of increase meant an additional £2,000 was available to Mr S. By this point, Mr S owed just short of £30,000 in other unsecured debt, an increase of over £7,000 since CLI2 was approved a year earlier. Given the amount of new credit Mr S had taken on in a relatively short period, I think he makes a reasonable point when he says the use of CATO to verify his income may’ve taken new lending into account. Given the size of the credit limit increase and additional credit Mr S had taken out in the previous year, I think it would’ve been proportionate for Tesco Bank to have reviewed his bank statements to get a clearer picture of his circumstances. I found Mr S had an average income of £1,824 in the three months before CLI3 was approved. I took the same outgoings into account as CLI2 and found an average figure of £2,065. The bank statements I reviewed showed Mr S’ income was higher than his outgoings at this point. I also think it’s fair to note the level of new credit Mr S had taken out in the three months before CLI3 was approved. In March 2022 a £13,000 loan was deposited into Mr S’ account. Mr S went on to use much of that to repay existing debt. The remaining was used for general living expenses and to reduce the overdraft. Another new loan, this time for £3,054, was also paid into Mr S’ account in March 2022. In April 2022 a loan of £14,350 was paid into Mr S’ current account. Again, part of that was used to consolidate and repay other debts. But some of the funds appear to have been used for living expenses. In my view, Mr S’ bank statements show that by June 2022 his unsecured debt had reached a level that was no longer sustainable. Mr S was reorganising and consolidating his unsecured debts on what appears to have been a regular basis, borrowing large sums to do so. And, as noted above, Mr S’ bank statements also show his regular outgoings exceeded his income at this point. In my view, proportionate checks would’ve most likely shown Tesco Bank Mr S wasn’t in a position to sustainably afford CLI3 in June 2022 and led it to leave CLI2 in place. As I haven’t been persuaded Tesco Bank lent responsibly when it approved CLI3 I’m upholding Mr S’ complaint from that point and intend to award a refund of any interest, fees and charges applied to balances over £6,400 from June 2022. I’ve considered whether the business acted unfairly or unreasonably in any other way including whether the relationship might have been unfair under Section 140A of the Consumer Credit Act 1974. However, I’m satisfied the redress I have directed below results in fair compensation for Mr S in the circumstances of his complaint. I’m satisfied, based on what I’ve seen, that no additional award would be appropriate in this case. I invited both parties to respond with any additional information or comments they wanted me to consider before I made my final decision. Mr S responded to confirm his acceptance. We didn’t hear back from Tesco Bank by the deadline. 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. As Mr S has confirmed his acceptance and no new information has been provided I see no reason to change the conclusions reached in my provisional decision. I still think Mr S’ complaint should be upheld, for the same reasons. My final decision My decision is that I uphold Mr S’ complaint and direct Barclays Bank UK PLC trading as Tesco Bank to settle as follows:

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• Rework the account removing all interest, fees, charges and insurances (not already refunded) that have been applied to balances above £6,400 from June 2022 • If the rework results in a credit balance, this should be refunded to Mr S along with 8% simple interest per year* calculated from the date of each overpayment to the date of settlement. Tesco Bank should also remove all adverse information from June 2022 regarding this account from Mr S’ credit file. • Or, if after the rework the outstanding balance still exceeds £6,400, Tesco Bank should arrange an affordable repayment plan with Mr S for the remaining amount. Once Mr S has cleared the outstanding balance, any adverse information recorded from June 2022 in relation to the account should be removed from their credit file. *HM Revenue & Customs requires Tesco Bank to deduct tax from any award of interest. It must give Mr S a certificate showing how much tax has been taken off if he asks for one. If it intends to apply the refund to reduce an outstanding balance, it must do so after deducting the tax. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 24 April 2026. Marco Manente Ombudsman

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