Not upheld: irresponsible lending and unfair credit relationship complaint against Bank of Scotland plc, trading as Halifax

Decision detail

Summary

Miss G complained that Halifax acted irresponsibly in providing her with an overdraft facility from September 2017 and four subsequent increases, and failed to monitor her account properly. Halifax agreed it lent irresponsibly from 30 May 2022 and offered a refund of interest and charges from that date. The ombudsman found that for the third and fourth increases (December 2021 and January 2022), Halifax conducted reasonable and proportionate affordability checks showing adequate disposable income. Although Miss G used her overdraft heavily throughout the relationship, there were no clear signs of financial distress requiring intervention before 30 May 2022. The ombudsman upheld Halifax's offer as fair and reasonable, finding no unfairness in the lending relationship prior to that date.

The Ombudsman's reasoning

The ombudsman applied Section 140A of the Consumer Credit Act 1974 to assess whether the lending relationship was unfair. For the initial overdraft and first two increases, insufficient documentation prevented a finding of unfairness despite inability to verify proportionate checks. For the third and fourth increases (December 2021 and January 2022), the checks were found to be reasonable and proportionate given the verified income and affordability calculations showing adequate disposable income. Account monitoring before 30 May 2022 showed heavy overdraft use but no clear signs of financial distress requiring intervention. From 30 May 2022 onwards, the spending patterns indicated financial difficulty, which Halifax appropriately acknowledged by agreeing to refund charges from that date. The ombudsman found Halifax's offer from 30 May 2022 fair and reasonable in all circumstances.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website