Not upheld: irresponsible lending / unfair credit relationship complaint against Bank of Scotland plc (trading as Halifax)

Decision detail

Summary

Ms D complained that Halifax unfairly applied overdraft charges to her current account despite her struggling to maintain a credit balance. She argued Halifax should not have allowed her to continue using her overdraft when it ought to have realised the facility was unsustainable or harmful. The ombudsman interpreted the complaint as alleging an unfair lending relationship under section 140A of the Consumer Credit Act 1974. However, after examining Ms D's account statements and transaction history, the ombudsman found no objective indicators of financial difficulty as defined by FCA guidance, no direct notification from Ms D of struggling, and evidence that Ms D had sufficient funds to reduce overdraft usage but chose not to. The ombudsman concluded Halifax was reasonably entitled to believe Ms D was choosing to use her overdraft rather than being reliant on it, and therefore did not act unfairly. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied section 140A of the Consumer Credit Act 1974 to assess whether the lending relationship was unfair to Ms D. The key question was whether Halifax unfairly allowed Ms D to continue using her overdraft in circumstances where it ought reasonably to have realised the facility had become unsustainable or harmful. The ombudsman found that while prolonged overdraft usage can indicate financial difficulty, it does not automatically do so. Critically, Ms D's account showed sufficient incoming credits to clear the overdraft, discretionary spending, and no objective indicators of financial difficulty as defined by regulatory guidance. Ms D did not notify Halifax of struggling, and her account activity suggested she was choosing to use the overdraft rather than being locked into it. Therefore, Halifax was reasonably entitled to conclude Ms D was choosing to use her overdraft and was not obviously reliant on it.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website