Partially upheld: irresponsible lending - unaffordable overdraft increases complaint against Bank of Scotland Plc, trading as Halifax

Decision detail

Summary

Ms W complained that Halifax irresponsibly increased her overdraft limit on multiple occasions between April 2021 and November 2024, from £150 to £2,040. The ombudsman found that whilst initial checks were reasonable, Halifax failed to adequately scrutinise six applications made between April and June 2021 and should have identified by August 2021 that Ms W was financially struggling with over-reliance on overdrafts and short-term high-cost credit. Halifax's actual knowledge of Ms W's bank statements showed her income was lower and spending higher than declared, making a proposed repayment plan unachievable. The complaint was partially upheld, requiring Halifax to remove all interest, fees and charges on balances above £430 from 10 August 2021 onwards, arrange repayment plans for any remaining balance, and return overpayments with interest.

The Ombudsman's reasoning

The ombudsman found that whilst initial checks for the £150 overdraft in April 2021 were reasonable, Halifax failed to conduct adequate checks on the numerous subsequent applications. By August 2021, the volume of applications and pattern of overdraft usage should have alerted Halifax to Ms W's financial difficulties. Halifax had access to bank statements as an existing customer and should have identified that Ms W was struggling, with a real risk of deterioration. The proposed repayment figure of £45.46 was not achievable given her monthly commitments. Halifax's failure to conduct borrower-focused lending decisions and its delayed intervention (SMS in March 2023) meant it irresponsibly lent beyond what Ms W could sustainably repay from 10 August 2021 onwards.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website