Next Retail Limited · DRN-6109989

The complaint Miss K complains that Next Retail Limited lent to him irresponsibly. What happened In April 2017, Miss K opened an account with Next and in November 2017 she requested credit on it. Next accepted her application and the credit limit was set as follows: Date Event New limit 24 November 2017 Account opening £150 5 February 2018 Credit limit increase (CLI)1 £300 5 June 2018 CLI2 £3,750 4 September 2019 Credit limit decrease (CLD)1 £3,000 On 16 July 2025, Miss K complained to Next. She said she was in a debt management plan (DMP) when she applied for the credit. She said if Next had carried out proper checks it ought to have refused to lend to her, and certainly shouldn’t have increased her limit. Next looked into Miss K’s complaint and issued a final response letter. It said the account opening and CLI’s had taken place too long ago under the complaint handling rules set by the Financial Conduct Authority (FCA), as more than six years had passed before the complaint was raised. But it did look at the account performance and said the highest balance in the history of the account was £1,717.35. Miss K had never been in arrears, and she’d paid more than the minimum payment in 43 of the 73 months the account had been opened. Next said this showed “the account was managed well and the limits given were affordable”. Miss K didn’t accept Next’s response, so she referred her complaint to our service. One of our investigators looked into it and felt the complaint could reasonably be considered as being about and unfair relationship as described in Section 140A of the Consumer Credit Act 1974 (s.140). That being so she didn’t agree with Next that the complaint had been brought too late. She went on to consider the whole complaint. While she felt Next ought to have carried out further checks before CLI2 was offered, she said even if it had done more, it would have been likely to agree the limit anyway. She didn’t uphold the complaint. Miss K didn’t agree with our investigator so, as there was no agreement, the complaint has been passed to me to decide. 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. There are time limits for referring a complaint to the Financial Ombudsman Service, and Next thinks this complaint was referred to us too late. Our investigator explained why she didn’t, as a starting point, think we could look at a complaint about the lending decisions that happened more than six years before the complaint was made. But she also explained why

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it was reasonable to interpret the complaint as being about an unfair relationship as described in s.140, and why this complaint about an allegedly unfair lending relationship had been referred to us in time. For the avoidance of doubt, I agree with our investigator that I have the power to look at the complaint on this basis. I think this complaint can reasonably be considered as being about an unfair relationship as Miss K says she can never pay more than the minimum payment. This may have made the relationship unfair as she had to pay more in interest than she could afford and was unable to reduce the debt. I acknowledge Next still doesn’t agree we can look at this complaint, but as I don’t think it should be upheld, I don’t intend to comment on this further. In deciding what is fair and reasonable I am required to take relevant law into account. Because Miss K’s complaint can be reasonably interpreted as being about the fairness of her relationship with Next, relevant law in this case includes s.140A, s.140B and s.140C of the Consumer Credit Act 1974. S.140A says that a court may make an order under s.140B if it determines that the relationship between the creditor (Next) and the debtor (Miss K), arising out of a credit agreement is unfair to the debtor because of one or more of the following, having regard to all matters it thinks relevant: • any of the terms of the agreement; • the way in which the creditor has exercised or enforced any of his rights under the agreement; • any other thing done or not done by or on behalf of the creditor. Case law shows that a court assesses whether a relationship is unfair at the date of the hearing, or if the credit relationship ended before then, at the date it ended. That assessment has to be performed having regard to the whole history of the relationship. S.140B sets out the types of orders a court can make where a credit relationship is found to be unfair – these are wide powers, including reducing the amount owed or requiring a refund, or to do or not do any particular thing. Given what Miss K has complained about, I need to consider whether Next’s decision to lend to her and increase her credit limits, or its later actions, created unfairness in the relationship between her and Next such that it ought to have acted to put right the unfairness – and if so whether it did enough to remove that unfairness. Miss K’s relationship with Next is therefore likely to be unfair if reasonable and proportionate affordability checks were not done and doing so would have shown its lending to be irresponsible or unaffordable, and if it didn’t then remove the unfairness this created. I think there are key questions I need to consider in order to decide what is fair and reasonable in the circumstances of this complaint: • Did Next carry out reasonable and proportionate checks to satisfy itself that Miss K was in a position to sustainably repay the credit? • If not, what would reasonable and proportionate checks have shown at the time? • Did Next make a fair lending decision? • Did Next act unfairly or unreasonably towards Miss K in some other way?

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Next had to carry out reasonable and proportionate checks to satisfy itself that Miss K would be able to repay the credit sustainably. It’s not about it assessing the likelihood of it being repaid (sometimes referred to as credit risk), but it had to consider the impact of the repayments on her (affordability risk). There is no set list of checks that it had to do, but it could take into account several different things such as the amount and length of the credit, the amount of the repayments and the overall circumstances of the borrower. When Next agreed to lend to Miss K and for each CLI, it checked her credit file. When the opening limit was agreed, Miss K had a default on her file that had been registered five months earlier. And at CLI1, she had two as another had been recorded. While I don’t think these will have been a barrier to lending as the limits agreed at this stage were relatively modest, I do think they were warning signs of what could be a worsening financial situation which may make further credit unsustainable. I think Next ought to have at least asked Miss K about her income. By CLI2, there were four defaulted accounts, the most recent of which was just four months old. Given the size of the increase offered, I think Next ought to have asked Miss K for details of her income and expenditure. While there’s no set way of doing that, it might have asked to see her bank statements as they provide a good picture of her circumstances. Miss K has provided copies of her statements from July 2017 to July 2018, and I’ve taken a close look at those. The account runs exclusively in credit, and the balance rarely drops below £200. Her income is around £1,550 per month and her committed expenditure – things like housing costs and other credit – come to £1,165 or so. I can see Miss K paid £255 to a debt charity which is likely to be the DMP she mentioned in her complaint. But there was only one default showing on her credit file in November 2017 when Next first lent to her (and that was new), and at this time, she also had other credit such as car finance and other catalogue shopping and communication accounts. So while I don’t have details of the DMP, I suspect it had been in place for some time and wasn’t reflective of her current circumstances. I’ve thought carefully about whether the presence of recent defaults and her payment to the debt charity meant Next ought to have refused to lend, but I don’t think it does. Next knew about the defaults and therefore that Miss K had experienced difficulties with credit previously. Ultimately, it was up to Next to decide whether it wished to accept the credit risk of taking her on as a customer, provided it was reasonably entitled to believe that the credit was affordable and unlikely to cause harm to her going forward. I note too that this credit was only able to be used ‘in store’ with Next and wasn’t available to be used more widely than that. The information Next received from the credit reference agency included an affordability score and it relied on that. While I think it should have done more, if it had – perhaps by looking at her statements – I think it would have come to the same decision to lend. I say this because her current account was in good order and showed that she ought to be able to manage the repayments to the account. It was satisfied with the credit risk presented by the recent defaults and took the view that it was prepared to lend. I think Next was entitled to reach that view and it made a fair decision to lend when it did so. Did Next act unfairly or unreasonably towards Miss K in some other way?

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I’ve looked carefully at all the information and evidence provided by each party to the complaint. I’ve seen nothing in the contact notes that Miss K told Next she was struggling with the account or the amount of credit it allowed. I’ve looked at how Miss K used the account and can see she didn’t miss any payments. She cleared the balance in full on a number of occasions. The highest balance was £1,717.35 (June 2025) comfortably within the £3,000 limit at the time, and she had an average balance of less than £600. I don’t think these factors would have given Next any indication that Miss K may have been struggling financially. I realise my decision will come as a disappointment to Miss K, but for the reasons I’ve already given, I don’t think Next lent irresponsibly to her or otherwise treated her unfairly in relation to this matter. I haven’t seen anything to suggest that Section 140A would, given the facts of this complaint, lead to a different outcome here. My final decision My final decision is that I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss K to accept or reject my decision before 9 April 2026. Richard Hale Ombudsman

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