Not upheld: irresponsible lending and unfair continuation of overdraft charges complaint against MONZO BANK LIMITED

Decision detail

Summary

Mr L complained that Monzo irresponsibly provided him with a £2,000 overdraft facility in March 2022 and continued charging him despite clear signs he was struggling to exit it, requiring him to take additional credit. Monzo did not uphold the complaint, stating they conducted appropriate affordability checks using CRA data and Mr L's declarations, and that they were not expected to micromanage accounts. An investigator agreed with Monzo, finding proportionate checks were carried out and fair lending decisions made, with Mr L having sufficient income to afford the overdraft. The ombudsman upheld this decision, finding that while Mr L was a repeat overdraft user, there were no indicators of financial difficulty as defined by regulatory guidance, his account received sufficient credits to clear the overdraft within a reasonable timeframe, and he had discretionary spending capacity. The ombudsman concluded that Monzo's repeat use communications were appropriate and that taking corrective action would have been disproportionate, particularly given Mr L repaid the overdraft in full within three years.

The Ombudsman's reasoning

The ombudsman found that Monzo carried out proportionate checks at application based on Mr L's declared income of £2,700 per month and the £2,000 overdraft limit, concluding he had sufficient funds to cover repayment and living costs. While Mr L was a repeat overdraft user, this alone does not indicate financial difficulty. The key issue was whether Mr L could afford the charges and had a reasonable prospect of repaying the overdraft. The ombudsman found that Mr L's account received sufficient credits to clear the overdraft within a reasonable timeframe, he had discretionary spending capacity, and there were no indicators of financial difficulty as defined by CONC. Monzo's repeat use communications were appropriate, and taking corrective action to reduce or remove the facility would have been disproportionate given Mr L's ability to repay and the fact he did repay in full within three years.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website