Upheld: unfair default declaration and inadequate communication regarding arrears calculation complaint against Starling Bank Limited
Financial Ombudsman decision DRN-6375422 of 2026-06-11T00:00:00+00:00. unfair default declaration and inadequate communication regarding arrears calculation complaint against Starling Bank Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-6375422 |
|---|---|
| Decision date | 2026-06-11T00:00:00+00:00 |
| Firm | Starling Bank Limited |
| Product | Personal loan |
| Claim type | unfair default declaration and inadequate communication regarding arrears calculation |
| Outcome | Upheld |
| Remedy | Starling Bank Limited must: (1) reverse the default and return L's accounts to its live book; (2) reconstruct the loan to the position it would have been in if never defaulted, continuing in accordance with the loan agreement and PAYG agreements; (3) follow usual Collections policies regarding the two missed payments and discuss an affordable repayment arrangement with L, documented clearly in writing; (4) remove all records of the default from L's credit file, while retaining records of the arrears from December 2022 and January 2023 to show an accurate picture; (5) permit L to use any remaining PAYG options in the usual way. No compensation was awarded as no evidence of inconvenience to L was found. |
Summary
L, a limited company, complained that Starling Bank Limited unfairly declared its £16,500 Bounce Back Loan in default in October 2024. L had missed only two contractual payments in December 2022/January 2023 and made all subsequent payments on time (except one day late in March 2024), using legitimate Pay As You Grow repayment holidays. Starling's default notice claimed L had failed to make payments 'on three separate occasions', but the ombudsman found this inaccurate and that Starling's method of calculating arrears was non-standard and not clearly explained to Mr D. In August 2024, Starling told Mr D that arrears could be addressed 'at a later date' and that default would occur 'if you were to miss three or more' payments, but then defaulted the loan without L missing any further payments. The ombudsman upheld the complaint, finding Starling acted unfairly by failing to clearly communicate that the loan would default without further missed payments, and directed the bank to reverse the default and return the account to its live book.
The Ombudsman's reasoning
The ombudsman found that while Starling repeatedly communicated about arrears and the consequences of default, it failed to clearly explain its non-standard threshold for triggering default. The bank's method of calculating arrears as 'three payments' was not intuitive and differed from the British Business Bank's stated usual practice of 90 days overdue. Critically, Starling told Mr D on 8 August 2024 that arrears could be addressed 'at a later date' and that default would occur 'if you were to miss three or more' payments, but L never missed three or more payments after that date. The ombudsman found that if Starling had clearly warned Mr D that the loan would default without any further missed payments, Mr D would likely have found funds to reduce or clear the arrears. The fact that only two contractual payments were missed (from over 18 months before default) and that L had made all subsequent payments on time (except one day late) supported the conclusion that Starling acted unfairly.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Starling Bank Limited, all decisions | 992 | 25% |
| Personal loan, all decisions | 22,070 | 30% |
Source
Read the original decision on the Financial Ombudsman Service website