Not upheld: irresponsible lending - overdraft limit increase complaint against Lloyds Bank PLC

Decision detail

Summary

Miss L complained that Lloyds Bank provided her with an unaffordable overdraft facility, specifically the increase to £1,000 in September 2024. She stated she was continuously using the overdraft, unable to exit it, and being charged daily fees, and that she could only manage her credit commitments by borrowing from family members. Lloyds Bank conducted affordability checks including validating her income of £1,850, obtaining her housing costs of £150, estimating essential living costs at £469, and checking her credit file which showed no adverse information. The ombudsman found these checks were reasonable and proportionate, and that Miss L had sufficient disposable income (£451) to afford the increase. Although Miss L consistently used her previous overdraft limit, she was able to clear it each month, which aligned with the purpose of short-term lending. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that Lloyds Bank conducted reasonable and proportionate affordability checks before increasing the overdraft limit to £1,000. The checks included validating income, obtaining housing costs, estimating essential living costs using statistical data, and checking credit files. Based on the information gathered, Miss L had sufficient disposable income (£451) to afford the overdraft increase. Although Miss L consistently used her previous £200 limit, she was able to clear it each month when receiving income, which aligned with the purpose of an overdraft as short-term lending. The ombudsman was not persuaded that Lloyds Bank should have known about Miss L's reliance on family borrowing or additional credit, as this was not evident from the information they obtained. The ombudsman also considered Section 140A of the Consumer Credit Act 1974 but found no evidence of irresponsible lending or unfair treatment.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website