Not upheld: irresponsible lending - affordability of overdraft facility complaint against Lloyds Bank PLC

Decision detail

Summary

Miss S complained that Lloyds Bank PLC provided her with an overdraft facility that became unaffordable from 2021 onwards, claiming the bank failed to notice her financial difficulties and should have reviewed her overdraft usage. Lloyds Bank partially upheld the complaint and refunded interest and charges from January 2024. The ombudsman found that Lloyds Bank's affordability checks were reasonable and proportionate, validating Miss S' income, assessing her disposable income, and checking her credit file before each limit increase. Although Miss S' statements showed gambling activity and financial difficulty, the ombudsman did not consider it reasonable to expect the bank to review statements when the income and expenditure details did not suggest financial struggle. The ombudsman concluded that Lloyds Bank acted fairly and did not lend irresponsibly, and therefore did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman found that Lloyds Bank's checks were reasonable and proportionate to the circumstances. The firm validated Miss S' income, obtained housing costs, estimated essential living costs using statistical data, and checked her credit file. Based on these checks, Miss S had sufficient disposable income to afford the overdraft limits and repay within a reasonable period. Although Miss S' statements showed signs of gambling and financial difficulty, the ombudsman did not consider it reasonable to expect Lloyds Bank to review statements when the income and expenditure details did not suggest financial struggle. The increase in unsecured credit commitments from £574 to £1,100 over 20 months, coupled with Miss S' income increase, was not considered a cause for concern, especially as she appeared to be managing other debts well. Since Lloyds Bank had already agreed the overdraft became unaffordable in January 2024 and refunded charges from that point, there was nothing further to consider regarding the April 2024 renewal.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website