Not upheld: irresponsible lending - overdraft limit increases and continued facility provision complaint against Monzo Bank Limited

Decision detail

Summary

Mr D complained that Monzo irresponsibly provided and increased his overdraft facility between July 2018 and January 2024, despite him consistently remaining overdrawn and rarely returning to a positive balance beyond payday. Monzo had already agreed to refund interest and charges for the period July 2018 to October 2019 but declined to extend this further. The ombudsman found that Monzo's affordability checks were reasonable and proportionate, Mr D's income substantially exceeded the overdraft limits, and his account management practices (using a savings pot) contributed to his overdraft usage. Despite Mr D's increasing reliance on the overdraft from June 2021 onwards, the absence of missed payments or other indicators of financial difficulty meant Monzo did not act unfairly. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied FCA CONC requirements for responsible lending, which require firms to conduct proportionate checks and ensure customers can make repayments without further borrowing or defaulting on other obligations. Monzo's checks (verifying income via CRAs, assessing housing costs, estimating essential living costs, calculating disposable income, and checking credit files) were found to be reasonable and proportionate. The overdraft limit increases were modest and Mr D's income significantly exceeded the limits, meaning he could always return to credit after payday. While Mr D's usage pattern showed increasing reliance from June 2021 onwards, the absence of missed payments, returned direct debits, or failure to return to credit indicated no financial difficulty. The ombudsman noted that Mr D's account management practices (using a Monzo pot) contributed to his overdraft usage pattern. The ombudsman also considered Section 140A of the Consumer Credit Act 1974 but found no unfair relationship.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website