Upheld: Account closure without notice complaint against MONZO BANK LIMITED

Decision detail

Summary

Mr M complained that Monzo defaulted and closed his account despite allegedly agreeing to a repayment plan that would prevent default. In June 2025, Monzo threatened to default Mr M's account unless he reduced his overdraft, and Mr M requested a repayment plan. Mr M claims Monzo told him the account wouldn't be defaulted if he agreed to a plan, but Monzo defaulted the account shortly afterwards. The ombudsman found that Monzo was unclear about the 12-month repayment threshold required to avoid default and that the agreed £68 monthly plan would exceed this period. However, the ombudsman determined that Mr M, facing bereavement, house move, and income instability, would likely have been unable to meet the approximately £85 monthly payment needed to avoid default. The ombudsman upheld the complaint and required Monzo to remove the default once Mr M repays the overdraft and to pay £155 in compensation.

The Ombudsman's reasoning

The ombudsman found that Monzo was not clear with Mr M about the conditions for avoiding a default. Monzo told Mr M his account wouldn't be defaulted if he agreed to a repayment plan, but the agreed plan of £68 monthly would take over 12 months to repay, which would still trigger a default. However, the ombudsman determined that Mr M would likely not have been able to repay the overdraft in under 12 months (approximately £85 monthly) given his financial circumstances, including bereavement, house move, and unstable income. Therefore, Mr M would have been defaulted regardless if the correct process had been followed. The ombudsman agreed that removing the default only after full repayment was fair, as removing it earlier would risk another default and longer credit file damage. The compensation offered was deemed appropriate given that most of Mr M's recent difficulties were unconnected to Monzo.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website