Partially upheld: unfair debt collection practices and credit file reporting complaint against Monzo Bank Ltd

Decision detail

Summary

Mr L complained that Monzo unfairly passed his account to a debt collector on 30 April 2025 after he had repaid the balance, and that a default was unfairly placed on his credit file. Monzo's system failed to register Mr L's final payment of £170 before transferring the account. The ombudsman found that while the default recorded in 2023 was correctly applied and should remain, the transfer to the debt collector after repayment was unfair. Monzo acknowledged the error and offered £125 compensation, which the ombudsman found fair and proportionate. The complaint was upheld in part, with the default remaining on the credit file but the account to be shown as settled.

The Ombudsman's reasoning

The ombudsman found that although Monzo is entitled to sell accounts to third parties, it should not have done so after Mr L had repaid the debt. The default recorded in 2023 was correctly applied when the account was in arrears for some time and a default notice had been issued. The default cannot be removed as it was properly recorded. However, the transfer of the account to a debt collector after repayment was unfair, and Monzo should have engaged with Mr L sooner. The £125 compensation offered by Monzo is fair and broadly in line with what would have been awarded. A potential data breach would be a matter for the Information Commissioner's Office.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website