Lloyds Bank Plc · DRN-6042441

The complaint Mr M complains Lloyds Bank Plc (Lloyds) irresponsibly lent to him. What happened Mr M took out a credit card with Lloyds in 2002 with an initial limit of £500. The credit limit was increased and decreased over the years. This included: Date Credit limit increase/decrease (CLI/CLD) New Limit 11 December 2007 CLI1 £800 12 June 2009 CLI2 £1,050 12 March 2010 CLD1 £1,000 12 September 2011 CLI3 £1,500 11 May 2012 CLI4 £2,250 13 September 2012 CLD2 £1,450 11 January 2013 CLD3 £1,300 13 August 2013 CLI5 £1,800 13 December 2013 CLD4 £1,750 11 July 2014 CLI6 £2,500 8 October 2018 CLD5 £1,000 27 July 2020 CLD6 £600 19 August 2021 CLI7 £1,200 18 August 2024 CLD7 £0 Lloyds responded to the complaint on 19 July 2024. It didn’t uphold the complaint because it felt the checks completed were reasonable and proportionate and the lending decisions had been fair. Mr M remained unhappy and asked our service to look into things. An Ombudsman issued a decision explaining why our service could only consider lending decisions which occurred from 8 June 2018. So, the only lending decision our service can consider is CLI7 on 19 August 2021 when the limit was increased from £600 to £1,200. On 26 February 2026, I issued a provisional decision on the merits of the complaint. I said: Our approach to complaints about irresponsible and unaffordable lending is set out on our website. In summary, there are some key questions I need to consider. This includes whether Lloyds completed reasonable and proportionate checks to satisfy itself Mr M was in a position to sustainably repay the credit. If it did, I need to consider whether it made a fair lending decision. If proportionate checks weren’t completed, I need to consider what such checks were likely to have shown. It’s not about Lloyds assessing the likelihood of being repaid, but it had to consider the impacts of the repayments on Mr M. There is no set list of checks which it had to do, but it could take into account several different things such as the amount and length of the credit, the amount of the monthly repayments and the overall circumstances of the borrower. It’s important to note that this was a type of revolving

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account credit which meant Lloyds needed to consider whether Mr M would be able to repay the total credit being made available within a reasonable period. 19 August 2021 (CLI7) - £600 to £1,200 Lloyds has explained its credit scoring system took data from a Credit Reference Agency (CRA) to produce an internal score. It also had information about how Mr M had managed his card and the repayments. It said it received regular payments for the limit already available to Mr M and some payments were above the minimum required. It said there were also occasions when he repaid his balance in full. He was considered a ‘good risk’ when the credit was increase on 19 August 2021. Lloyds has also explained it understood Mr M was employed earning £2,860 per month and this was verified using current account turnover. It also completed a credit search which showed Mr M had a revolving credit balance of £17,759 and a non-revolving credit balance of £19,838. Its checks showed he was paying £1,468 towards his credit commitments each month. There were no arrears or missed payments to indicate he wasn’t meeting his commitments. Additionally, Lloyds considered his other essential expenditure. It estimated his other nondiscretionary expenditure to be around £411 for housing and £478 for essential living costs. Therefore, it found he would be left with sufficient disposable income and therefore it felt the credit limit was affordable. Having considered the checks carried out, I am satisfied they were proportionate here. I’m mindful the credit limit was being increased by £600, and this didn’t represent a very high increase in a sustainable monthly repayment. From the information, it seems Lloyds had sufficient information to decide whether it was fair to lend to Mr M. I must now consider whether Lloyds made a responsible lending decision based on the information it obtained. I appreciate its consideration of Mr M’s expenditure seemed to show he had sufficient disposable income to be able to make the monthly repayments. I’m also mindful of what Lloyds has said about how Mr M used the card for retail spend and that he repaid the balance. Additionally, he had two savings accounts in a positive balance at the time of the lending decision. However, Lloyds needed to be satisfied the credit would be affordable and sustainable. Having considered things, I think there were other indicators which meant it wasn’t reasonable to increase his limit here as further credit wasn’t likely to be sustainable. Of note is that Mr M had a high amount of revolving and non-revolving credit. The monthly repayments he was making towards his credit commitments made up a significant proportion of his salary such that it ought to have indicated the increase might not be sustainable. Shortly before the lending, Mr M settled two loans with a total balance of £16,809.04 and took out another loan for £15,000 with Lloyds. Thinking about all of this information and his overall indebtedness (including his existing revolving credit balance), I think there were clear indicators Mr M might be reliant on credit and that he was borrowing to meet his existing commitments. I appreciate it appeared he had some savings, but this was a modest amount in relation to what he was committed to repay towards his existing credit. In light of these factors, I think it was clear any further credit (even a relatively modest credit limit increase) was very likely to worsen his financial position and wasn’t likely to be sustainable. Therefore, Lloyds shouldn’t have increased his limit on this occasion.

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Additionally, I’ve thought about what Lloyds knew about how Mr M had managed the card previously. There had been a number of decreases and Mr M had also opted out of automatic increases which might have indicated to it that he was attempting to limit his access to credit. Moreover, I can see in November 2020 an ATM restriction was applied as well as a gambling restriction. It’s not clear exactly what prompted this from the notes I have, but taking all this with the information Lloyds had from the credit search, I think these circumstances further speak to the unsustainability of the additional lending. Taking everything into account, I’m unable to conclude Lloyds made a fair lending decision. I think there were clear indicators from the information Lloyds had about how Mr M had been managing his financial commitments to demonstrate further credit wasn’t likely to be affordable or sustainable for him. He had high existing commitments and showed a pattern of borrowing which seemed to indicate he was likely to be reliant on credit. Therefore, I don’t think it was reasonable for Lloyds to increase Mr M’s credit limit. I’ve also considered whether Lloyds treated Mr M unfairly or unreasonably in some other way. I haven’t seen anything to suggest Lloyds ought to have done something more in respect of this account. Mr M has now made Lloyds aware he is struggling and I’d remind it of its obligation to treat him with reasonable forbearance and due consideration. I’ve also considered whether the relationship might have been unfair under Section 140A of the Consumer Credit Act 1974. However, I’m satisfied the redress I have directed below results in fair compensation for Mr M in the circumstances of his complaint. I’m satisfied, based on what I’ve seen, that no additional award would be appropriate in this case. I gave both parties the opportunity to respond to my decision and I’ve now heard back. Mr M accepted the decision. However, Lloyds didn’t. In summary, it said: • A review of Mr M’s bank statement did show the repayments to be affordable and sustainable. • It doesn’t believe the credit limit was used to meet other credit repayments. Mr M requested the credit limit increase, and the funds were used for home improvements. It would expect a customer who is reliant on credit to use the funds to repay other credit or essential living costs. • Although Mr M had previously declined credit limit increases, it believes this credit limit was requested for the purpose of completing the transaction for home improvements. It said Mr M used his credit card instead of his savings. • Mr M had previously declined credit limit increases, which doesn’t indicate he was reliant on credit but actually managing his money and credit carefully. • The credit card was dormant for nearly a year prior to the limit increase with a zero balance. He did not use the card again until he asked for a credit limit increase. This is not typical account activity that it would expect to see from a customer reliant on credit and in a cycle of borrowing. • Rescheduling finance is not always a sign of financial difficulties such as missed payments, exceeding credit limits or cash advances. Customers manage their creditors in this manner and may seek lower interest rates or to shorten their repayment duration. His credit file was in a good position.

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• Increasing Mr M’s limit was a very minor risk, the increase was very low and would have only cost an additional £30 a month. Whilst it agrees something happened later down the line in regards to Mr M’s financial situation, it doesn’t believe an additional payment of £30 a month was the cause. As Lloyds didn’t accept my provisional decision, I’ve proceeded to issue a final decision on the matter. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having considered the response provided by Lloyds, I am satisfied the conclusion I reached in my provisional decision is fair and reasonable in all the circumstances of this case. I see no reason to depart from the conclusion I reached for much the same reasons as I previously set out and which I’ve included above. However, I have provided some further clarity in light of Lloyds’ response. I appreciate Lloyds has noted the lending seemed to have been affordable for Mr M. However, it needed to ensure the lending would be affordable and sustainable. As explained, I’m satisfied there were clear indicators it was unlikely to be sustainable. In my provisional decision, I acknowledged the credit limit increase didn’t represent a very significant increase in the monthly repayments Mr M would need to make in order to repay it within a reasonable period. Nevertheless, this doesn’t mean it was fair for Lloyds to increase Mr M’s credit limit. It remains the case that Mr M already had a significant amount of other debt, and a very significant proportion of his net monthly income was already being used to repay his existing credit commitments. I also accepted Mr M had some modest savings and I also note he had a positive balance on his current account due to the loan which had been provided the month before. However, I don’t feel this is sufficient to say the lending was responsible given his existing debt and the amount he was paying on a monthly basis towards his credit commitments. I also accept what Lloyds has said about customers rescheduling finance for better terms (including better interest rates and so on). Additionally, I’ve thought about the information on the credit file and what this showed about how Mr M was managing his finances. A consumer may well struggle for some time to meet commitments before actually missing payments or exceeding credit limits. I don’t think the absence of these, or other similar indicators is sufficient to say further credit would be sustainable (even a modest amount) in light of his existing debts and commitments. I’d also note Mr M had taken out additional lines of credit shortly before the lending. I remain of the view that Lloyds had information about Mr M’s circumstances which demonstrated further credit was likely to worsen his financial position. Lloyds has also highlighted that the account was dormant for some time prior to Mr M requesting a credit limit increase. It says the credit was then used for retail spend and repaid. It says this isn’t consistent with someone who is reliant on credit. I set out in my provisional decision what I had seen about Mr M’s management of the card prior to the increase including what was shown on the account notes. Having taken all the circumstances into account including Mr M’s overall indebtedness, I’m satisfied at the time of Lloyds’ decision to increase Mr M’s credit limit it ought reasonably to have been clear further credit was unlikely to be sustainable.

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For these reasons and the reasons I outlined in my provisional decision, I remain of the view that Lloyds shouldn’t have increased Mr M’s credit limit to £1,200 on 19 August 2021 and it should put things right. Putting things right Lloyds should not have increased Mr M’s credit limit from £600 to £1,200 on 19 August 2021. Therefore, I don’t think it’s fair for it to charge any interest or charges on balances which exceed £600 from when it increased the limit. However, Mr M has had the benefit of spending the credit and so should pay this back. Therefore, to put things right Lloyds Bank Plc should: • Rework the account removing all interest, fees charges and insurances (not already refunded) that have been applied to balances above £600 from 19 August 2021. • If the rework results in a credit balance, this should be refunded to Mr M along with 8% simple interest per year* calculated from the date of each overpayment to the date of settlement. • Or if after the rework the outstanding balance still exceeds £600, Lloyds should arrange an affordable repayment plan with Mr M for the remaining amount. • Once Mr M has cleared the outstanding balance, any adverse information recorded after 19 August 2021 in relation to the account should be removed from his credit file. *If Lloyds considers that it’s required by HM Revenue & Customs to deduct income tax from that interest, it should tell Mr M how much it’s taken off. It should also give Mr M a tax deduction certificate if he asks for one, so he can reclaim the tax from HM Revenue & Customs if appropriate. My final decision For the reasons outlined above, I’m upholding this complaint and Lloyds Bank Plc should put things right in the way directed above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 15 April 2026. Laura Dean Ombudsman

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