Not upheld: irresponsible lending and unfair relationship complaint against Bank of Scotland plc trading as Halifax

Decision detail

Summary

Miss P complained that Halifax irresponsibly provided her with an overdraft facility that was unaffordable, with the limit increasing from £100 in 2015 to £2,500 by March 2024. Miss P argued she was in a cycle of persistent debt and that Halifax should have identified signs of financial difficulty and taken action such as suspending or reducing the facility. The ombudsman reviewed the complaint under section 140A of the Consumer Credit Act 1974 regarding unfair credit relationships. After examining Miss P's bank statements, credit file, and transaction history over the ten-year period, the ombudsman found that while Miss P was a repeat overdraft user, her income was generally sufficient to cover non-discretionary expenses and her overdraft use appeared to relate to discretionary spending rather than financial difficulty. The ombudsman concluded that Halifax's lending decisions were fair and proportionate, and that the firm was not required to take further action such as reducing the facility limit.

The Ombudsman's reasoning

The ombudsman applied section 140A of the Consumer Credit Act 1974 to assess whether the relationship between Halifax and Miss P was unfair. The ombudsman reviewed Miss P's account management over the near ten-year period and concluded that while Miss P was a repeat overdraft user, the evidence did not demonstrate she was in actual or potential financial difficulty. Miss P's income was sufficient to cover non-discretionary expenditure and existing credit commitments, with overdraft use appearing to relate to discretionary spending. The ombudsman found that proportionate checks would not have led Halifax to conclude the overdraft limits were unaffordable or could not be repaid within a reasonable period. The ombudsman also found that Halifax's identification of Miss P as a repeat user (rather than in persistent debt) and its communications were reasonable, and that the individual instances of potential financial difficulty were not sustained or consistently demonstrated across the ten-year period.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website