Partially upheld: Account closure without notice complaint against Lloyds Bank PLC

Decision detail

Summary

Mr S discovered in July 2025 that a Lloyds account had been fraudulently opened in his name without his knowledge or consent, with his wife having been coerced into facilitating the opening. Lloyds initially accepted responsibility and committed to closing the account and removing adverse credit file entries. However, Lloyds failed to follow through on this commitment, instead sending Mr S a demand for payment in October 2025 and subsequently selling the debt to a collection agency. The ombudsman found Lloyds not at fault for the initial unauthorized opening but upheld the complaint for its failure to properly handle the fraud report and its repeated errors in managing the account closure. Mr S suffered a mental health breakdown as a result of Lloyds' mishandling, with ongoing effects on his health and financial position. The ombudsman awarded £1,750 compensation for the distress and inconvenience caused by Lloyds' errors, distinguishing this from the distress caused by the fraud itself.

The Ombudsman's reasoning

The ombudsman found that while Lloyds was not at fault for the initial unauthorized account opening (as the third party had sufficient personal information and Mr S's wife was coerced), Lloyds was at fault for failing to promptly and reasonably close the account and remove adverse credit file entries after being notified of the fraud. The ombudsman distinguished between distress caused by the fraud itself (which Lloyds was not responsible for) and distress caused by Lloyds' subsequent errors (which it was responsible for). The ombudsman found that Lloyds' repeated failures—continuing to chase Mr S for payment, selling the debt to a collection agency, and incorrectly stating the default would remain on the credit file—caused significant additional distress beyond what would have occurred from the fraud alone. The £1,750 award was deemed appropriate as it fell within the bracket for sustained distress with severe disruption to daily life and health impacts lasting more than a year.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website