A lender has writter off a secured loan debt following a complaint to the Financial Ombudsman Service that the product was mis-sold to a mentally-ill man.
An FOS statement says that the man, known only as Mr U, was taken into care because of schizophrenia and psychosis.
Mr U then fell into arrears on a £40,000 secured loan for home improvements.
The FOS will not name the lender.
His sister, Mrs Z, complained that the lender had not properly checked Mr U’s ability to take on the financial commitment and should not have lent to him.
The bank responded that they did not doubt the information Mr U provided, and that they had fast-tracked his case due to the loan’s low LTV.
Mrs Z then complained to the FOS. The ombudsman decided the bank should have checked more of the evidence Mr U provided.
For example, the bank did not check Mr U’s claims that he did not pay council tax, or that he was getting more pension than he claimed.
The FOS said an adviser had helped Mr U fill out the application form.
The ombudsman said: “And, in our view, his answers raised questions that should have alerted the adviser that more information was needed.”
The bank then agreed with the FOS that the loan should not have been fast-tracked, and the debt was written off.