PayPal (Europe) S.a r.l et Cie, S.C.A. · DRN-6112822

The complaint Miss S is complaining that PayPal (Europe) S.a r.l et Cie, S.C.A. (PayPal) lent to her irresponsibly by providing her with a credit account. What happened In September 2022, PayPal approved Miss S’s application for credit, giving her a credit limit of £2,400. They then increased the limit to £3,400 in August 2023 and £4,400 in September 2023. In April 2025, Miss S complained to PayPal. She said they failed to assess affordability properly and granted her unaffordable credit at a time when she was a student and already facing financial difficulties. She commented that they’d increased her credit limit significantly in a short space of time and said she mostly made minimum payments and used the account for essentials. PayPal didn’t uphold Miss S’s complaint. They said they’d done enough checks before lending to her. Miss S wasn’t happy and brought her complaint to the Financial Ombudsman Service. One of our investigators looked into it and said that PayPal hadn’t done enough checks and shouldn’t have lent to Miss S. She said reasonable and proportionate checks would have shown the credit would be unaffordable. PayPal didn’t accept our investigator’s view. They said they’re not required to ask for bank statements or to verify income and expenditure. And they remained of the opinion they’d carried out enough checks and complied with Financial Conduct Authority (FCA) requirements. They asked for an ombudsman to review Miss S’s complaint – and the matter’s come to me. 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. Having done so, I’m upholding Miss S’s complaint for broadly the same reasons as our investigator. I’ll explain further below: What’s required of lenders? The FCA sets out in a part of its handbook known as CONC what lenders must do when deciding whether or not to lend to a consumer, or when increasing the amount they lend to a consumer. In summary, a firm must consider a customer’s ability to make repayments under the agreement without having to borrow further to meet repayments or default on other obligations, and without the repayments having a significant adverse impact on the customer’s financial situation.

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CONC says a firm must carry out checks which are proportionate to the individual circumstances of each case. Did PayPal carry out reasonable and proportionate checks before approving Miss S’s application for credit? Before deciding to lend to Miss S, PayPal asked her about her monthly income and her housing situation. And they considered credit reference agency (CRA) data about her credit history and overall indebtedness. The CRA data suggested Miss S wasn’t overindebted or struggling with existing debts at the time of her application. But Miss S had told PayPal her income was between £500 and £1,000 per month. In this context, £2,400 was a high opening credit limit. Whilst the FCA rules don’t say that a firm needs to obtain bank statements or verify expenditure details, they do say that a firm shouldn’t generally rely on a customer’s own statement of their income without verifying it with a third party. And they say that a firm should make a reasonable estimate of a customer’s non-discretionary expenditure. PayPal didn’t verify Miss S’s income. And it appears they estimated she had no non-discretionary expenditure. In the circumstances I’m not satisfied they carried out enough checks. If PayPal had carried out additional checks, would they have been able to fairly decide to lend to Miss S? While PayPal didn’t need to review Miss S’s bank statements at the time, these do give a good indication of what her actual financial circumstances were. So I’ve reviewed her bank statements for the three months leading up to PayPal’s decision to lend to Miss S and thought about what PayPal would have found if they’d verified Miss S’s income and asked her for more information about her expenditure. Having done so, I can see Miss S’s earnings were only about £340 per month at the time. Her bank statements show significant other receipts, both in cash and from her partner at the time. Miss S has told us her partner was contributing towards her bills and discretionary spending, and other family members also helped her out from time to time. So I wouldn’t have expected PayPal to consider any of this additional income to be sustainable, though they might reasonably have considered some of her bills to be shared. Looking at Miss S’s expenditure, she had direct debits for communications and car running costs totalling around £200 per month. And she was spending significant amounts on fuel and in supermarkets each month. In total, her non-discretionary spending appears to have been around £600 per month. If PayPal had assumed Miss S was sharing the £600 per month spending equally with her partner, they’d likely have estimated that she had disposable income of around £40 per month. That wouldn’t have been enough to support reasonable repayments on a £2,400 debt. In addition, it’s clear from Miss S’s low income that her financial situation wasn’t stable or sustainable. And so I’m satisfied PayPal shouldn’t have approved Miss S’s application. What about the credit limit increases? If PayPal hadn’t approved Miss S’s application for the account, they wouldn’t have been able to increase the credit limit on it. So I don’t need to consider whether the limit increases were responsible or affordable for Miss S – they simply wouldn’t have been available to her.

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Did PayPal act unfairly in any other way? I’ve also considered whether the relationship might have been unfair under s.140A of the Consumer Credit Act 1974. However, I’m satisfied the redress I’m proposing below results in fair compensation for Miss S in the circumstances of her complaint. I’m satisfied, based on what I’ve seen, that no additional award would be appropriate in this case. Putting things right As PayPal shouldn’t have lent to Miss S, it’s not fair for them to retain any interest and charges they’ve charged on her account. But Miss S has had the benefit of the amounts she borrowed, so it’s fair she repays those amounts to PayPal. To settle the matter, PayPal need to: • 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, refund this to Miss S along with 8% simple interest per year* calculated from the date of each overpayment to the date of settlement. • If, after the rework, there is still an outstanding balance, PayPal should arrange an affordable repayment plan with Miss S for the remaining amount. • Once Miss S has cleared the balance, PayPal need to arrange for any adverse information relating to the account to be removed from her credit file. *HM Revenue & Customs requires PayPal to deduct tax from any award of interest. They must give Miss S a certificate showing how much tax has been taken off if she asks for one. My final decision As I’ve explained above, I’m upholding Miss S’s complaint. PayPal (Europe) S.a r.l et Cie, S.C.A. need to take the steps I’ve outlined above to settle the matter. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss S to accept or reject my decision before 27 April 2026. Clare King Ombudsman

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