Partially upheld: unfair application of funds and delay in returning surplus; handling of third-party payment to closed account complaint against National Westminster Bank Public Limited Company (NatWest)

Decision detail

Summary

D, a limited company, complained that NatWest unfairly applied a £14,400 third-party payment made in error to D's closed business account to offset D's defaulted Bounce Back Loan, and failed to return the remaining £3,536.69 surplus within a reasonable time. NatWest had previously returned other third-party payments despite the BBL being in default, but decided to apply this payment to the loan balance using its right of set-off. The ombudsman found NatWest was entitled to apply the payment to the debt but acted unfairly by delaying return of the surplus until November 2025, several months after receiving the payment and after D complained. The complaint was partially upheld, with NatWest ordered to pay 8% interest on the surplus, £300 compensation for inconvenience, and refund unnecessary payment plan payments.

The Ombudsman's reasoning

The ombudsman found that NatWest was entitled to use its right of set-off to apply the £14,400 payment to the defaulted BBL balance, as D had requested the funds be returned to the business and therefore the funds belonged to D who had an outstanding debt. The previous decision to return other third-party payments was a commercial choice that did not permanently waive NatWest's right to apply later payments. However, the ombudsman found NatWest acted unfairly by retaining the £3,536.69 surplus and not returning it promptly, which prevented D from accessing funds that belonged to the business and caused inconvenience through lack of clear communication.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website