Upheld: irresponsible lending and failure to monitor repeat overdraft usage complaint against Lloyds Bank PLC

Decision detail

Summary

Miss T complained that Lloyds irresponsibly approved and repeatedly increased her overdraft facility from £50 (October 2022) to £1,550 (July 2024) despite her financial struggles. Lloyds rejected the complaint, arguing she had sufficient disposable income. The ombudsman upheld the complaint, finding that while initial lending decisions were fair, Lloyds failed to monitor Miss T's pattern of repeat usage and financial difficulty indicators (constant maximum balances, exceeded limits, returned direct debits, and over-reliance on buy now, pay later credit). The ombudsman determined that by January 2025, Lloyds should have proactively removed or reduced the facility rather than merely sending repeat usage letters. Lloyds must remove all interest, fees, and charges from 1 January 2025 onwards and arrange appropriate repayment terms.

The Ombudsman's reasoning

The ombudsman found that while the initial lending decision and limit increases were fair based on disposable income at the time, Lloyds failed to monitor and respond appropriately to Miss T's pattern of repeat usage combined with signs of financial difficulty. Although Miss T's credit file did not show obvious distress, her account statements revealed constant reliance on the overdraft at maximum limits, multiple exceeded limits, returned direct debits, and over-reliance on buy now, pay later credit. These factors collectively demonstrated financial difficulty. Regulations require lenders to take steps to reduce repeat overdraft usage, and sending letters alone was insufficient. By January 2025, Lloyds should have proactively contacted Miss T to remove or reduce the facility rather than waiting for her to initiate contact.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website