DRN-6308884

The complaint Miss P complains about Santander UK Plc continuing to provide her with an overdraft facility. What happened Miss P had a 123-student account with Santander from 2008, followed by a graduate account until December 2019 when Miss P’s bank account became an Everyday current account. Miss P had an overdraft facility of £2,000 which didn’t incur interest whilst she’d a student/graduate account. When the account was changed to an Everyday account in December 2019 interest was applied to overdraft usage. Miss P said Santander shouldn’t have provided the overdraft facility. Adding that she was persistently having to use her overdraft which has caused her to incur fees, a financial loss. She complained to Santander. Santander said they’d identified that Miss P was using her overdraft extensively which wasn’t consistent with short term borrowing. They said they’d used various communication channels to highlight Miss P’s high usage and to provide options to help, but Miss P hadn’t responded. Miss P wasn’t happy with Santander’s response and referred her complaint to us. Our investigator said Santander ought to have seen Miss P was struggling financially yet they’d continued to apply interest and charges to Miss P’s account, which they said was unfair. They asked Santander to put things right. Santander said Miss P didn’t engage with them, and that they couldn’t take any further action as this would have caused financial distress to Miss P. They asked for an ombudsman to decide. 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 done so, I’ve reached the same overall conclusions as the investigator, and for broadly the same reasons. Whilst I’ve read and considered everything, if I don’t mention any specific point, it’s not because I failed to take it on board and think about it, but because I don’t think I need to comment on it to reach what I think is a fair and reasonable outcome. This is not meant as a discourtesy but rather reflects my role of resolving disputes with minimum formality. Overdrafts are generally used to cover short term emergency borrowing needs, as they’re considered to be an expensive form of credit, particularly where the account remains overdrawn for significant periods of time. And they aren’t intended for, or an appropriate means of long-term borrowing. CONC 5D.2 sets out a business’ obligation to identify and monitor repeat use of overdrafts

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and their obligation to identify customers in actual or potential financial difficulty. An example being where a customer has become or remained overdrawn in every month over a 12- month period. CONC 5D.3 sets out what interventions the business should take in cases of repeat overdraft users. Where there are signs that a customer is (or might potentially be) suffering financial difficulties, the business must: • Communicate with the customer highlighting the pattern of use and whether this is resulting in high avoidable costs and encourage the customer to contact them about their situation as doing nothing could make things worse. • If after a reasonable period of time the pattern continues and the customer hasn’t made contact, the business must take reasonable steps to contact the customer to set out suitable options designed to help the customer. • If the customer still doesn’t engage with the business the business must after a reasonable period, consider whether to continue offering the overdraft facility and whether to remove or reduce it, so long as this doesn’t cause the customer financial hardship I can see Miss P was using her overdraft facility consistently from December 2016. And I agree with our investigator that the nature of this account usage is something I would have expected Santander to pick up on as a concern when carrying out their annual review of the account especially from September 2020 – this being the first review following the overdraft accruing interest when there were high avoidable costs being incurred. Miss P used her overdraft consistently when she’d a student account and this didn’t change after it was moved to an Everyday account where her overdraft usage would incur interest. From December 2019 she was still regularly using most of her available overdraft limit and – on occasion – going above her overdraft limit. There is no point during the 12-month period from September 2019 to September 2020 (the review) when the account is brought into a credit balance. I think this shows Miss P was in financial difficulty as she was over-reliant on her overdraft to get by such that there wasn’t a realistic prospect that she would be able to pay off the overdraft. I’ve carefully considered Santander’s comments about the actions they took. But I’m not persuaded they did act fairly by continuing to add overdraft interest after reviewing Miss P’s account around September 2020. Santander said they tried to engage with Miss P around September 2020 and then in May and June 2021, and then annually around March. But CONC considers a reasonable period is unlikely to be longer than one month, so I don’t think Santander did enough to explain to Miss P that if she failed to engage in the discussion one of the possible consequences could be the suspension or removal of the overdraft facility or a reduction in the credit limit. I can’t see that Santander did this until March 2025. I take on board Santander’s comment that as Miss P didn’t engage with them, they didn’t remove or reduce her overdraft facility as this would cause her financial hardship. But I’m not satisfied Santander did enough in this instance to fulfil their obligations under CONC as while they didn’t remove or reduce Miss P’s overdraft due to financial hardship, they continued to apply interest to her overdraft usage which I don’t think was fair. I say this as by Miss P being allowed to run her account in constant overdraft usage she’s paid a significant amount in interest and charges, more than £2,000.

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I think given Miss P had persistently used her overdraft for some years they ought to have done more as she was displaying signs of actual or potential financial difficulties. And Santander benefitted as interest and charges were applied. Had Santander appropriately monitored Miss P’s overdraft use and intervened in line with their obligations under CONC, I don’t think Miss P would have had to pay the charges and interest for the use of the overdraft. It’s fair then, that the charges and interest paid should be returned to her. Putting things right Santander should remove the unfairness caused by failing to step in sooner by doing the following: Re-work Miss P’s current overdraft balance so that all interest, fees and charges applied to it from September 2020 onwards are removed. • If the effect of removing all interest, fees and charges results in there no longer being an outstanding balance, then any extra should be treated as overpayments and returned to Miss P, along with *8% on the overpayments from the date they were made until the date of settlement. If no outstanding balance remains after all adjustments have been made, then Santander should remove any adverse information from Miss P’s credit file. Or • If an outstanding balance remains on the overdraft once these adjustments have been made Santander should contact Miss P to arrange a suitable repayment plan for this. Once the balance is settled, they should remove any negative information on Miss P’s credit file from September 2020. * HM Revenue & Customs requires Santander to take off tax from this interest. Santander must give Miss P a certificate showing how much tax it’s taken off if they ask for one. My final decision I uphold this complaint. And ask Santander UK Plc to take the actions above. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss P to accept or reject my decision before 20 May 2026. Anne Scarr Ombudsman

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