Partially upheld: Account closure without notice complaint against Starling Bank Limited

Decision detail

Summary

S, a newly incorporated events company, obtained a £50,000 Bounce Back Loan in November 2020 based on a projected annual turnover of £200,000. S made all required monthly repayments from early 2023 to May 2025 without missing any payments. In May 2025, Starling restricted S's account, closed it, and applied the account balance of £18,674.70 against the outstanding loan through set-off without clear explanation or opportunity for S to respond. The ombudsman found that Starling was entitled to withdraw the loan because the turnover projection was not reasonably grounded given S had no trading history and COVID-19 restrictions severely limited events. However, the ombudsman upheld the complaint on the limited basis that Starling's communication and handling of the account closure and set-off were inadequate, and ordered £350 compensation for these service failings.

The Ombudsman's reasoning

The ombudsman found that S did not meet the eligibility requirements for the BBL because the projected £200,000 annual turnover was not reasonably grounded. At the time of application in November 2020, S was a newly incorporated events company with no trading history, and COVID-19 restrictions severely limited large-scale events. Therefore, Starling was entitled to bring the lending relationship to an end and apply set-off. However, Starling failed to clearly explain its concerns, did not provide S with a meaningful opportunity to respond before taking action, and created confusion by issuing a cheque while simultaneously applying set-off. The ombudsman found no material financial loss resulted from these service failings because Starling was entitled to recover the loan regardless, and there was no evidence S could have repaid the outstanding balance in full if given the opportunity.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website