Not upheld: irresponsible lending and failure to provide support with overdraft repayment complaint against Lloyds Bank Plc

Decision detail

Summary

Mr S complained that Lloyds Bank had applied high interest and charges to his personal current account overdraft and failed to support him as he struggled to repay. Lloyds had granted him a £500 overdraft facility in 2017 and increased the credit limit to £2,000 in August 2022. From October 2022 onwards, Mr S used the overdraft almost continually and showed signs of financial stress, including repeatedly exceeding his credit limit from June 2023. The ombudsman found that Lloyds' initial credit limit increase was based on proportionate checks showing Mr S had sufficient disposable income, and that Lloyds took reasonable and proportionate steps to support Mr S by sending periodic letters from August 2023 and implementing a staged interest rate reduction and credit limit reduction plan in February 2025. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied FCA CONC rules on responsible lending, which require proportionate checks before lending and regular reviews to ensure affordability. For the August 2022 credit limit increase, the ombudsman found that even using actual account statement data showing slightly lower income, Mr S appeared to have sufficient disposable income to repay the £2,000 limit within a reasonable period. Regarding ongoing use, the ombudsman found that Lloyds took reasonable steps by sending periodic letters from August 2023 onwards inviting Mr S to discuss options, and when Mr S did not respond, Lloyds took proportionate further action in February 2025 by reducing interest rates and implementing a staged credit limit reduction. The ombudsman concluded these steps were in line with regulatory requirements and proportionate to the signs of financial stress identified.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website