Not upheld: debt recovery procedures and escalation to collections; address error in correspondence complaint against Lloyds Bank PLC

Decision detail

Summary

Mr B complained that Lloyds unfairly escalated his Bounce Back Loan to recoveries and a debt collection agency without adequate notice and without properly considering his health and personal circumstances. The loan fell into arrears from June 2023, and despite multiple repayment arrangements, Mr B failed to maintain payments. After a formal demand in April 2024, Lloyds agreed a final repayment plan on 25 April 2024, which Mr B also failed to maintain. Some correspondence was sent to an incorrect address due to a system error. The ombudsman found Lloyds demonstrated fair forbearance, that the address error did not materially impact the outcome, and that Lloyds took reasonable steps to support Mr B's vulnerability. The complaint was not upheld, and the £150 compensation already offered for the address error was deemed fair.

The Ombudsman's reasoning

The ombudsman found that Lloyds demonstrated fair and reasonable forbearance by not taking immediate recovery action when arrears first occurred and by working with Mr B over an extended period with multiple repayment arrangements. The key repayment plan agreed on 25 April 2024 was not maintained, with expected payments in May and June 2024 not being made. Once a reasonable repayment plan has been agreed and not followed, particularly where arrears have built up over a prolonged period and a formal demand has already been issued, it is generally fair for a lender to proceed with recovery. Regarding the address error, while acknowledged as a mistake, the ombudsman found it did not materially impact the outcome because Mr B was already aware of the arrears and formal demand, understood the repayment plan expectations, would have known whether he was making agreed payments, and continued to receive loan servicing statements at the correct address. Regarding vulnerability, Lloyds recorded Mr B's support needs, engaged with him about circumstances, agreed repayment arrangements, and signposted support, which constituted reasonable steps. The ombudsman concluded it would not be reasonable to expect indefinite forbearance where payments were not maintained and agreed plans were not adhered to.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website