Have you had big overdraft problems for a long period?
You can make an affordability complaint and ask for a refund of overdraft charges if:
- your overdraft limit was increased to a level you would be unable to clear; or
- your overdraft usage showed you were in long-term financial distress. For example, being in the overdraft all the time, or using an unauthorised overdraft a lot.
This article shows how to make an affordability complaint to your bank, with a free template letter to use.
Banks are rejecting many good complaints, so I also explain how to send a rejected complaint to the Financial Ombudsman (FOS).
Overdraft affordability complaints
Overdrafts are supposed to be for short term borrowing
Banks are regulated by the Financial Conduct Authority which puts treating customers fairly at the heart of its approach.
Overdrafts are intended to be used for short-term problems, not as long-term borrowing. A bank should review a customer’s repayment record and overdraft limit and if there are signs of financial difficulty, offer help.
One sign of financial difficulty is hardcore borrowing for a long period. The Lending Code defined this as “the position where a customer’s current account overdraft remains persistently overdrawn for more than a month without returning to credit during that period”.
Some recent Ombudsman decisions
All cases are very individual. But these examples give you an indication of what the Ombudsman thinks is important.
In this 2020 NatWest decision, the Ombudsman decided:
NatWest did have an obligation to monitor Miss K’s use of her overdraft facility.
Any fair and reasonable monitoring of Miss K’s overdraft facility would have resulted in NatWest being aware Miss K was in financial difficulty … by October 2014 at the absolute latest. So NatWest ought to have exercised forbearance from this point onwards.
In this 2021 Santander case, the bank did review the customer’s overdraft but failed to act:
By this point, Miss C was hardcore borrowing. In other, words she hadn’t seen or maintained a credit balance for an extended period of time. Santander’s own literature suggests that overdrafts are for unforeseen emergency borrowing not prolonged day-to-day expenditure. So I think that Miss C’s overdraft usage should have prompted Santander to have realised that Miss C wasn’t using her overdraft as intended and shouldn’t have continued offering it on the same terms.
A similar decision was reached in this 2021 Lloyds case:
Lloyds acted unfairly when it continued charging overdraft interest and associated fees after it renewed Mr and Mrs C’s overdraft in March 2013. By this point, it ought to have been clear that Mr and Mrs C were in no position to sustainably repay what they owed within a reasonable period of time.
Mr and Mrs C’s statements leading up to the renewal shows they hadn’t really had a credit balance on their account for a prolonged period. Indeed, they’d had regular returned payments and had also exceeded their limit. In these circumstances, it ought to have been apparent Mr and Mrs C were unlikely to be able to repay what they owed within a reasonable period with overdraft interest, fees and associated charges continuously being added.
And another one, this time against the Co-op:
Ms A’s statements show that she was regularly relying on payday lenders or other high cost … [and] for much of the previous year Ms A was ‘hardcore borrowing’. In other, words she often didn’t see or maintain a credit balance for an extended period of time… I think Co-op should have… treated Ms A with forbearance rather than charge even more interest, fees and charges on the overdraft.
First, decide which reasons apply to your overdraft complaint
Read through these and think about which apply to your case.
The bank set your limit too high
This may have been from the start when you were first given an overdraft. Or the initial low limit may have been fine, then the bank increased it to a level which it was impossible for you to repay.
It doesn’t matter if you asked for your limit to be increased or the bank just offered you an increase. In either case, the bank should have reviewed your situation before increasing the limit.
If the bank saw signs of financial difficulty, it should not have increased your credit limit. And it should have considered offering your help (the regulator’s word is forbearance) for example by stopping adding charges.
How high a limit is too high?
There is no set figure, it depends on your income and expenses. An overdraft of £3,000 for someone whose income is £1,800 a month is a lot – but if you earn £5,000 a month, then a £3,000 overdraft may be reasonable.
The bank should have seen you were in difficulty
Banks should review your overdraft:
- most banks have a clause in the overdraft conditions saying they will review it annually. You may not have known this – it isn’t clear that many banks did the reviews they should have;
- the Ombudsman decided in the case of a NatWest customer (see above) that the bank should have reviewed the customer’s overdraft even though its conditions didn’t say it would.
Overdrafts are meant to be used when you have a problem. Using the overdraft a lot for a few months is fine. Or for a few days at the end of a month before you are paid.
But the bank should notice at a review if you were in financial distress. For example if you are in the overdraft for all (or almost all) of the month for a prolonged period. Or if you were exceeding your arranged overdraft limit regularly for a significant amount. Either of these suggests you are reliant on the overdraft to pay everyday bills and you will find it hard or impossible to stop using the overdraft.
There isn’t a set definition of what a “prolonged period” is – I would say over a year is prolonged. Or of what unauthorised overdraft usage is “significant” – that depends on the level of your income.
Other points that help your complaint
You won’t win an affordability complaint by saying the charges were too high. Instead, you say the bank should have known they were unaffordable for you because of all the financial problems it could see on your statements and your credit record.
Here is a checklist, work out if any of these apply to you:
- often having direct debits or standing orders not being paid;
- a lot of gambling showing on your statements;
- significantly increasing other debts with the same bank;
- being recently rejected for a loan or a credit card by the bank;
- significantly increasing debts with other lenders showing on your credit record;
- a worsening credit record – maxed out credit cards, new missed payments, defaults etc;
- using payday loans;
- increasing mortgage arrears;
- making payment arrangements with other creditors;
- a reduction in the income going into your account.
If you can think of another reason your bank should have known you were in trouble, from its own records or your credit record, then add that to your list. You will list all these points in your complaint.
Making your complaint
What you need at the start
You don’t need to know the exact dates your limit was increased before complaining.
If you have paper statements or you can download them from the app that may be useful for you. But you don’t need to send these statements to the bank with your complaint – the bank already has them!
You can’t go back and see exactly what your credit score was in say 2018 when the bank increased your limit. But your current credit record shows what was happening in 2017 and 2018. So download your credit report now and keep it. The sooner you get the report, the further back it goes. I suggest you get your free TransUnion statutory credit report.
How to send your complaint
I don’t recommend phoning. And banks make it hard to complain by email.
When the account is still open, send your complaint by secured message in the app or on the bank’s website. Take a copy of what you put in the message – you could email it to yourself so it won’t get lost and the date is recorded.
If the account is closed, you can write a letter or use Resolver to complain. Resolver is an odd sort of claims company that never charges anything- it is just a forwarding system. To start an overdraft complaint through Resolver, there isn’t a special category for these affordability complaints so choose Other.
What to say in your complaint – a template
The section above looked at the reasons to complain and the other good points that apply to your case – you are now going to turn those into a complaint.
In the template below, I’ve invented some examples and dates so you can see how it should read. The bits in italics should be changed or deleted to to tell your story. And add any other points.
I am making an affordability complaint about the overdraft on my current account number 98765432.
Your identity details (not needed if you complain by secure message):
My name is xxxxx xxxxxxxx. My date of birth is dd/mm/yy. The email address I use(d) for this account was email@example.com.
If you are complaining your limit was too high:
You should never have given me an account with such a large overdraft. When I applied in 2015, you should have checked my credit record and you would have seen I had recently missed payments to a credit card and had taken several payday loans.
You should not have increased my overdraft limit in about 2014. When you increased the limit, you should have seen that I had significant gambling transactions showing on my account and that my debts to other lenders on my credit record had increased a lot.
I do not know the exact months of these overdraft limit increases. In your reply to this complaint, please tell me when the increases were and how much the limit went up on each occasion.
AND/OR say they should have noticed when your overdraft usage got worse
By 2012 I had been in my overdraft constantly for many months, not getting back into the black even when I was paid. This “hardcore borrowing” is a clear sign of financial difficulty. My income was only £1,850 a month – after I had paid bills, there was no way I could hope to clear an overdraft of £3500 in a reasonable length of time.
By 2016 I had a large unauthorised overdraft for many days each month.
Overdrafts are meant for short-term borrowing but that was not what I was using the account for. The overdrafts fees and charges you were adding were making my position worse.
Add any other points
You should also have realised that I was in financial difficulty because you had rejected my loan application in 2016 and you should have noticed that the income going into my account had decreased. In 2017 you should have seen from my credit record that I had made payment arrangements with other debts.
End by asking for a refund of charges and interest:
I would like you to refund all the interest and charges that were added to my account from 2016 when you increased my overdraft limit.
I would like you to refund all the interest and charges that were added to my account from 2018 when you should have realised that my finances had got worse to the point that I was no longer able to clear the overdraft.
The Financial Ombudsman says that 8% simple interest should be added to any cash refund paid to me.
I would also like any late payment and default markers to be removed from my credit records.
Points to note
Personal accounts, not business accounts
The complaints covered here relate to personal accounts. For business accounts, talk to Business Debtline about your options.
You can complain if the account is still being used or if it is closed
These complaints can be made in a lot of different situations. For example:
- you are still using the account or you have stopped using it and are paying it off;
- the account has been closed;
- the bank defaulted it and sold it to a debt collector (here you still complain to the bank, not the debt collector). If the debt collector has gone to court and got a CCJ, add to your complaint that you want the CCJ removed as part of the settlement of your complaint.
But if you have had an IVA or bankruptcy after these problems, or if you are still in a DRO, then you shouldn’t complain – ask in the comments below for details.
Banks may say FOS won’t look at an old complaint, but this isn’t right. FOS will often look at a complaint if you have only just found out you can complain.
Open and recently closed accounts aren’t a problem – the bank will still have your statements.
If your complaint is about an account that was closed more than 6 years ago, it’s harder to win. The bank may no longer have much information about the old account. If you still have copies of your old bank statements for these old closed accounts this is worth a try.
If you feel you have a good older case take it to the Financial Ombudsman and let them decide!
Packaged bank accounts
These affordability complaints are nothing to do with packaged bank accounts. MSE has a good page about how to complain about packaged bank account charges. I suggest you don’t try to combine this with an affordability complaint – make two separate complaints to the bank and leave a gap of at least a month between them.
Bank says No – go to the Ombudsman
You can’t go straight to the Ombudsman, you have to wait for the bank to reply. The bank should reply in 8 weeks.
Banks reject many good complaints, hoping you will give up. So don’t! You know if the overdraft has caused you a lot of problems.
In particular, if the bank says you could have declined the increase to your overdraft limit or you never let the bank know you were in difficulty, FOS may not think that is a good reason. And ignore any statements by the bank that FOS will not look into things that happened more than 6 years ago.
The easy way to complain to FOS is by completing this online form:
- you can use what you put in your complaint to the bank;
- if the bank rejected your complaint or made a low offer, say why you think this is unfair;
- use normal English, not legal terms.
If your credit record shows that you had other debt problems send it to FOS. You don’t need to send your bank statements – the bank will supply those to FOS.
Do these complaints work?
Yes! Banks may turn you down but people winning cases at the ombudsman. FOS is a friendly service but it isn’t speedy. It isn’t faster if you use a solicitor or a claims firm, and you are not more likely to win your complaint.
The comments below this article are from other people who have made this sort of complaint. That is a good place to ask for help if you aren’t sure what to do.
If you have priority debts such as utility bills, rent, council tax and benefit overpayments, these can’t wait until your overdraft complaint is settled. Still start the overdraft complaint now, but you need debt help as well. So phone National Debtline on 0808 808 4000, tell them you have made an affordability complaint but you would like to know what your other debt options are.