Not upheld: irresponsible lending - insufficient affordability checks complaint against Monzo Bank Limited

Decision detail

Summary

Mr B complained that Monzo lent to him irresponsibly by providing a £10,000 loan in July 2023 and increasing his overdraft limit to £2,000 in February 2024 without conducting adequate affordability assessments. The ombudsman found that while Monzo's checks were insufficient for such significant and long-term commitments, an examination of Mr B's bank statements revealed that proportionate checks would have shown his income was adequate and his actual expenditure was lower than Monzo's estimates. Consequently, even with proper affordability assessments, Monzo would reasonably have agreed to the lending, and the complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the regulatory requirement for reasonable and proportionate affordability assessments that are borrower-focused. While acknowledging that Monzo's checks before the loan and final overdraft increase were insufficient given the significance and duration of the commitments, the ombudsman examined what more thorough checks would have revealed. By reviewing Mr B's bank statements, the ombudsman determined that Monzo's income estimates were reasonable, the statistical expenditure estimates were actually generous, and Mr B's declared income was corroborated by actual deposits. Therefore, even with proportionate checks, Monzo would reasonably have concluded Mr B could sustain the repayments.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website