Not upheld: irresponsible lending - affordability of overdraft facility complaint against Monzo Bank Ltd

Decision detail

Summary

Miss B complained that Monzo Bank Ltd irresponsibly provided her with an overdraft facility that was increased twice between September and October 2024, from £250 to £500. She argued the lending was unaffordable, particularly given her persistent reliance on both the overdraft and a Monzo credit card. Monzo defended its lending decisions based on affordability checks at the time of application. The ombudsman found that Monzo conducted reasonable and proportionate checks using credit reference agency data and statistical expenditure estimates, and that Miss B had sufficient income and disposable funds to afford the facility. Although Miss B was a repeat overdraft user, the ombudsman determined she was not trapped in unsustainable borrowing as she cleared her balance monthly and had no missed payments. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied FCA CONC regulations requiring proportionate checks and fair lending decisions. Monzo's checks were reasonable given the circumstances, using permitted methods (CRA verification and statistical expenditure data). The lending decisions were fair as Miss B had sufficient disposable income, no adverse credit history, and could clear balances monthly. While Miss B was a repeat overdraft user, this alone does not indicate financial difficulty. Critically, Miss B received credits exceeding amounts needed to clear the overdraft within a reasonable period and cleared balances monthly, indicating she was not trapped in unsustainable borrowing. Monzo appropriately monitored usage and contacted Miss B with guidance, which was the expected regulatory response.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website