Not upheld: irresponsible lending and unfair relationship under Consumer Credit Act 1974 section 140A complaint against Lloyds Bank PLC

Decision detail

Summary

Miss B complained that Lloyds Bank irresponsibly provided her with overdraft facilities that were unaffordable and caused her to become reliant on credit over a 15-year period. Lloyds Bank declined to consider lending events more than six years before the February 2025 complaint. The ombudsman found that complaints regarding lending before August 2019 were outside regulatory time limits under both the six-year and three-year awareness rules, and that any unfairness from earlier periods was mitigated by a significant credit received in 2017. For the period from August 2019 onwards, the ombudsman found that Lloyds Bank's proportionate affordability checks (declared income, housing costs, statistical estimates, and credit checks) were reasonable and supported its lending decisions. The ombudsman rejected Miss B's arguments that Lloyds Bank should have identified informal borrowing from family and friends or recognised unsustainable reliance on credit, as such informal lending is not easily identifiable and regulatory rules did not require transaction-level review. The complaint was not upheld and no remedy was directed.

The Ombudsman's reasoning

The ombudsman applied section 140A of the Consumer Credit Act 1974 to assess whether the relationship between Lloyds Bank and Miss B was unfair. The complaint regarding lending events before August 2019 was outside the six-year regulatory time limit and the three-year awareness rule, as Miss B would have been aware of the problem and loss at each lending event through monthly statements. A significant credit received in 2017 mitigated any potential unfairness from earlier lending. For the period from August 2019 onwards, the ombudsman found Lloyds Bank's proportionate checks (declared income, housing costs, statistical living cost estimates, and credit checks) were reasonable and led to justified affordability conclusions. The ombudsman rejected Miss B's argument that Lloyds Bank should have identified informal borrowing from family and friends or identified a pattern of unsustainable borrowing, as such informal lending is not easily identifiable and the regulatory rules did not require transaction-level review. The presence of other credit commitments and discretionary expenditure did not demonstrate reliance on credit for essential expenditure or borrowing from unsustainable sources.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website