Not upheld: Complaints handling failures complaint against Lloyds Bank PLC

Decision detail

Summary

Mr K complained that Lloyds Bank PLC provided him with an unaffordable overdraft facility that was increased from £250 to £5,000 between October 2019 and March 2020. From September 2023 onwards, Mr K became reliant on the overdraft, using it repeatedly each month. In November 2024, Mr K informed Lloyds Bank of reduced household income and requested a hold on charges, which Lloyds Bank granted for 30 days. When Lloyds Bank resumed charging interest in January 2025, Mr K complained that they should have checked whether his circumstances had improved. An Investigator upheld the complaint, but the ombudsman disagreed. The ombudsman found that Lloyds Bank's initial lending decisions were based on reasonable and proportionate checks, and that while Mr K's repeat overdraft usage from September 2023 onwards was concerning, it did not necessarily indicate financial difficulty because he cleared the overdraft each month when paid and did not use the full available limit. The ombudsman concluded that Lloyds Bank appropriately monitored the account, contacted Mr K about repeat usage, and provided appropriate forbearance when he explicitly informed them of financial difficulties. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied FCA CONC regulations requiring firms to conduct proportionate affordability checks and periodically review overdraft usage for signs of repeat use and financial difficulty. For the initial increases up to March 2020, Lloyds Bank conducted reasonable and proportionate checks based on verified income, housing costs, estimated living expenses, and credit file information, with no adverse indicators present. While Mr K showed repeat overdraft usage from September 2023 onwards, the ombudsman found this did not necessarily indicate financial difficulty because: (1) he did not use the full available limit; (2) he cleared the overdraft each month when paid, albeit briefly; (3) he was not borrowing from unsustainable sources; and (4) his borrowing was not increasing exponentially. Lloyds Bank appropriately monitored the account and contacted Mr K about repeat usage in February and August 2024. When Mr K explicitly informed Lloyds Bank in November 2024 that he was struggling, they provided appropriate forbearance with a 30-day interest freeze and signposted support options. The ombudsman rejected the argument that Lloyds Bank should have checked whether circumstances improved before resuming interest, as Mr K was aware the freeze was temporary and was invited to contact them for further help. The ombudsman also found that while Lloyds Bank's nine-month delay in responding to the complaint was poor service, they mitigated this by suspending interest during the investigation period and offering £80 compensation.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website