Not upheld: irresponsible lending and unaffordable overdraft provision complaint against NATIONAL WESTMINSTER BANK PUBLIC LIMITED COMPANY

Decision detail

Summary

Miss B complained that NatWest provided her with an unaffordable overdraft while she was in an IVA. She opened a Student Current Account in December 2015 with a £500 fee-free overdraft that increased to £2,000 by March 2016. Although Miss B's credit file showed a previous IVA (August 2011-August 2012) with debts of approximately £14,500, the ombudsman found this information was more than three years old and did not indicate recent financial difficulties. The ombudsman determined that Miss B had sufficient disposable income (£2,900 in 2022, £1,900 in 2023) and that her persistent overdraft usage was due to account management practices rather than financial difficulty. NatWest appropriately monitored her usage and took proportionate action by contacting her in December 2022 and June 2023, and subsequently stopping interest charges from November 2023. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that although NatWest would have seen Miss B's historical IVA on her credit file, this information was more than three years old and in isolation did not indicate recent financial difficulties. The overdraft was provided on a fee-free basis, so Miss B incurred no financial loss from its provision or limit increases. Regarding overdraft usage, while Miss B remained at the upper limit, her account management pattern (transferring income to savings and gradually withdrawing it) indicated this was a matter of account management rather than financial difficulty. NatWest appropriately monitored usage and took proportionate steps by contacting Miss B in December 2022 and June 2023, and subsequently stopping interest charges from November 2023 when it became clear the account was no longer being actively used.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website