Upheld: inadequate disclosure of cooling-off period consequences; failure to explain practical effect of loan replacement complaint against Monzo Bank Limited
Financial Ombudsman decision DRN-6370994 of 2026-05-19T00:00:00+00:00. inadequate disclosure of cooling-off period consequences; failure to explain practical effect of loan replacement complaint against Monzo Bank Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-6370994 |
|---|---|
| Decision date | 2026-05-19T00:00:00+00:00 |
| Firm | Monzo Bank Limited |
| Product | personal loan |
| Claim type | inadequate disclosure of cooling-off period consequences; failure to explain practical effect of loan replacement |
| Outcome | Upheld |
| Remedy | Monzo must: (1) restructure Miss W's loan so that the remaining balance, interest rate, repayment profile and overall cost reflect what would have applied under the original January 2025 loan, taking into account payments already made; (2) amend Miss W's credit file records to accurately reflect the loan position she would have been in had the original loan continued on its original terms; (3) pay Miss W £150 compensation for distress, inconvenience and upset caused by the lack of clear explanation. |
Summary
Miss W took out a £10,350 personal loan with Monzo in January 2025 at 6% interest. In September 2025, she applied for a £7,000 top-up, which Monzo structured as a replacement loan at a higher 6.76% interest rate. Within the 14-day cooling-off period, Miss W withdrew from the top-up and repaid the £7,000 after Monzo confirmed she would only pay accrued interest. However, Miss W remained on the new loan at the higher rate, leaving her worse off overall. The ombudsman upheld her complaint, finding that Monzo failed to clearly explain that exercising the cooling-off right would not restore her original loan terms, and ordered Monzo to restructure the loan to reflect the original terms, amend her credit file, and pay £150 compensation.
The Ombudsman's reasoning
While Monzo's application journey included information that the top-up loan would replace the original loan and could not be reinstated, the material about the 14-day cooling-off right created a reasonable impression that Miss W could unwind her decision in practical terms by withdrawing and repaying the additional borrowing. The ombudsman found that the material did not sufficiently clarify that despite withdrawing and repaying the additional borrowing, Miss W would remain on a new loan at a higher rate and be worse off overall. The ombudsman considered it reasonable for a customer exercising a cooling-off right to expect not to be left worse off, particularly where they sought confirmation beforehand. The lack of clarity about the practical consequences of withdrawal was a significant omission that prevented Miss W from making an informed decision.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Monzo Bank Limited, all decisions | 170 | 11% |
Source
Read the original decision on the Financial Ombudsman Service website