Monzo Bank Ltd · DRN-6052368

The complaint Miss B has complained that Monzo Bank Ltd acted irresponsibly when it provided her with an overdraft facility and allowed her to increase the limit multiple times. Background Miss B has a current account with Monzo. In January 2022 she applied for a £50 overdraft facility and was approved. Between January and April that year Miss B increased and decreased the limit on the facility multiple times, so it ranged between £50 and £2,000. She believes that Monzo was irresponsible when it agreed to the various limit increases and ought to have realised that she was unable to afford the overdraft facility and was experiencing financial difficulties and struggling to manage her account. She’s asked that Monzo clear the outstanding balance owed on her overdraft, refund all interest fees and charges she’s paid in relation to it and pay her compensation for the stress it has caused her. Monzo has said that it completed all necessary checks at the time Miss B applied for the overdraft and at each point she requested a limit increase. Having done so it was satisfied that the facility was affordable for her, so it didn’t think it had made an error in providing it to her. It also noted that when Miss B experienced issues managing her account it offered her meaningful tailored support. So, it didn’t uphold her complaint. Unhappy with Monzo’s response Miss B brought her complaint to our service. One of our investigators looked into it already. She found that the checks run by Monzo at the time Miss B applied for the overdraft, and each time she requested a credit limit, were reasonable and proportionate. She said that the facility appeared affordable for her and that when she ran into difficulty with it, Monzo responded in a fair and considered way. So, she didn’t think the business had done anything wrong and didn’t recommend the complaint be upheld. Miss B disagreed with the investigator’s findings and asked for an ombudsman to review her complaint and so it’s been passed to me for consideration. My findings I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so I agree with the findings of our investigator, and I won’t be upholding Miss B’s complaint. I know this will come as a disappointment to her, so I’ve set out my reasoning below. I also want to acknowledge that I’ve summarised the events of the complaint. But I want to assure both parties that I’ve reviewed everything on file. And if I don’t comment on something, it’s not because I haven’t considered it. It’s because I’ve concentrated on what I think are the key issues. Our powers allow me to do this. This simply reflects the informal nature of our service as a free alternative to the courts.

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Our general approach to complaints about unaffordable or irresponsible lending – including the key rules, guidance, and good industry practice – is set out on our website. The rules don’t set out any specific checks which must be completed to assess creditworthiness. But while it is down to the firm to decide what specific checks it wishes to carry out, these should be reasonable and proportionate to the type and amount of credit being provided, the length of the term, the frequency and amount of the repayments, the total cost of the credit and what it knew about the consumer at the time of application. Monzo has confirmed that when Miss B applied for the facility in January 2022, she completed an income and expenditure form with it declaring her income as £21,000, living with her parents with minimal living costs. She had some credit facilities already, but these were all well maintained and in good order. Having checked her credit file there was no history of missed payments, arrears or defaults. So, it agreed to provide Miss B with the overdraft facility as it appeared that it would be affordable and sustainable for her. Having reviewed the checks completed by Monzo at the time I think they were reasonable and proportionate for the amount of credit and type of credit Miss B was applying for. So, I don’t think it was wrong to approve the initial application. Miss B then went on to request multiple limit increases between January 2022 and April 2022. These have been discussed in great detail already by our investigator and I won’t repeat those findings here. Monzo has confirmed that it repeated the credit checks each time Miss B requested a limit increase and each time found that the amount requested was likely to be affordable. I don’t think this is unusual given it was unlikely Miss B’s circumstances would have changed dramatically during such a short period of time. She remained employed at the same income over the four months in question, was still living with her parents so had no increase in living expenses and still had enough disposable income to support the limit increases as they happened. And throughout this time she continued to maintain her other lines of credit well, so there was no indicator of stress on her credit file, which remained up to date will all accounts paid as expected. So, I don’t think Monzo needed to do more thorough checks than it did when Miss B asked for the various limit increases and I think it was reasonable to approve them. And I don’t think it was wrong for the bank to provide the lending it did. Miss B has referred to various rules that are set out in the Consumer Credit sourcebook (“CONC”) and has queried why, when she utilised the full £2,000 limit on her overdraft did Monzo not contact her to check everything was okay. I think it’s important to clarify Miss B was entitled to use the full approved limit available to her, so I wouldn’t expect a bank to reach out when a consumer uses the credit they’ve been provided with. That in and of itself doesn’t necessarily mean that a consumer is experiencing financial stress. CONC does require that businesses review how overdrafts are being used, and that if there are signs that a consumer is becoming over reliant on the credit facility it needs to discuss this with them and consider whether or not the facility is still affordable. These reviews tend to happen annually, and I can see Monzo did complete these reviews on Miss B’s account. By June 2022, six months after the facility had been added to Miss B’s account, Monzo had contacted her to discuss her use of the overdraft facility and whether or not it was still affordable to her. At this point Monzo froze the interest that would generally be applied to the overdraft and supported Miss B with repayment plans so she could reduce the limit on the account in a fair way and repay what she owed in a reasonable amount of time. These reviews continued each year and Monzo has continued to complete regular reviews with Miss B to ensure the repayment plans that are in place are affordable for her. I would expect the business to work with consumers in this way and think Monzo has offered genuine tailored support as it is expected to.

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Miss B has referred to overdraft as short term lending and has queried why she was allowed to increase the limit on her account beyond her monthly wage. It is important to clarify that while overdrafts are designed to be flexible, revolving credit, they are not classified as short term lending and it’s not unusual for consumers to request limits that exceed their monthly income. Providing the bank has completed reasonable checks, to ensure that the amount of credit appears to be affordable and sustainable, it can provide limits that are greater than a person’s salary. This will be based on other considerations such as other lines of credit, existing outgoings and disposable income. And as explained above, I think the checks completed by Monzo when Miss B applied for the limit increases were proportionate and that the lending decisions were reasonable. So even though she was given a limit that exceeded her monthly salary I don’t think the business made an error. Miss B has also explained that there were periods of time when she was gambling in a compulsive way. I’m sorry to hear that Miss B experienced issues with gambling and am glad this is no longer a problem for her. She’s asked why Monzo would give her access to an overdraft when there were gambling transactions on her account. It is important to clarify that Monzo didn’t review the individual transactions on Miss B’s bank statements before providing her with the overdraft facility. And there is no requirement for it to do so. Sometimes, if the initial checks show indicators of financial stress a business might ask to see more information before deciding whether or not to approve someone’s application for credit. However as explained I think the checks Monzo did do were sufficient and there was nothing in those checks that indicated Miss B may be struggling to manage her finances so there was no reason to check her statements in depth. Which means Monzo was unaware of her gambling when it provided her with the overdraft. I understand that Miss B has struggled to repay the overdraft facility on her account and that she was made redundant after it was approved and when her circumstances changed she found it hard to meet her repayments. However I can only base my decision on the information that was available to Monzo at the time she applied for the facility and limit increases, between January and April 2022, and for the reasons set out above I think the checks completed by Monzo were sufficient, the lending looked to be affordable and sustainable and it wasn’t necessary to run more thorough checks or review the individual transactions Miss B was making. So I don’t think Monzo would have realised during the period in question that Miss B was gambling or that it was becoming problematic for her. All of which means I can’t uphold her complaint. I’ve also considered whether Monzo acted unfairly or unreasonably in some other way, including whether its relationship with Miss B might have been viewed as unfair by a court under s.140A Consumer Credit Act 1974. However, for the same reasons I’ve set out above, I’ve not seen anything that makes me think this was likely to have been the case. My final decision For the reasons set out above I don’t uphold Miss B’s complaint again Monzo Bank Ltd. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss B to accept or reject my decision before 24 April 2026. Karen Hanlon Ombudsman

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