Not upheld: loan and overdraft enforcement; demand for repayment complaint against Lloyds Bank PLC

Decision detail

Summary

N, a business partnership, complained that Lloyds Bank's actions regarding its business loan (£532,000) and overdraft facility resulted in the partnership going out of business. The partnership had difficulty making loan payments and the overdraft, originally intended as short-term and to be repaid by VAT refund, remained in use. In March 2024, Lloyds demanded repayment of both facilities, citing an event of default, and transferred the loan balance to the current account before closing it. The ombudsman did not uphold the complaint, finding that the bank was entitled to demand repayment as the overdraft was repayable on demand and the loan was in arrears, and that the consolidation of debt was reasonable.

The Ombudsman's reasoning

The ombudsman found that the overdraft facility was repayable on demand as is standard, and the bank was entitled to make demand when it did as a commercial decision. The loan was admittedly in arrears, constituting an event of default that triggered the bank's enforcement rights. The ombudsman rejected the argument that the facility should have been withdrawn, noting that N could have requested withdrawal or simply not used it, and that keeping it in place did not lead to demonstrable loss. The consolidation of debt was found to be reasonable.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website