Nationwide Building Society · DRN-6228691

Complaint Mr P has complained about the overdraft charges Nationwide Building Society (“Nationwide”) applied to his current account. He’s effectively said that his overdrafts were unaffordable and so he shouldn’t have been provided with them. Therefore, the charges applied to his account were unfair as he could not afford them. Background Mr P has also complained about a credit card and personal loans that Nationwide provided to him. However, we’ve already issued separate answers on those complaint and this decision is only concerned with Mr P’s overdrafts. Nationwide provided Mr P with an overdraft on five separate occasions. This effectively means that Nationwide entered into five distinct arranged overdrafts with Mr P. In the first instance, Mr P was provided with an overdraft which had an agreed limit of £250 in March 2017. This facility was completely removed from the account in May 2017. Mr P then successfully applied for an overdraft for a second time in November 2017. This limit was increased on a number of occasions until it reached £5,000.00 in August 2018. The limit was then gradually decreased until the facility was completely removed from Mr P’s current account in early October 2018. In late October 2018, Mr P again applied for an overdraft from Nationwide. The limit on the facility was increased and decreased before the facility was once again removed in April 2020. In February 2023, Mr P once again applied for an overdraft which remained on the account until December 2023. Finally, in February 2024, Mr P applied for an overdraft which remained on the account until it was removed in September 2024. As far as I understand it, Mr P hasn’t had an arranged overdraft on his Nationwide account since then. I’ve already separately explained why I’m not considering Mr P’s complaint about his first two. I’ll therefore be offering no comment on those matters and this decision is only concerned with Mr P’s final three overdrafts. In other words, what has happened in relation to the overdrafts on Mr P‘s account from October 2018 onwards. One of our investigators looked at Mr P’s complaint and thought that Nationwide hadn’t done anything wrong when initially providing Mr P with his overdrafts and allowing him to use them from October 2018 onwards. So he didn’t think that Mr P’s complaint should be upheld. Mr P disagreed with the investigator’s view and so the complaint was passed to an ombudsman for review. My findings I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Basis for my consideration of this complaint

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There are time limits for referring a complaint to the Financial Ombudsman Service. Nationwide has argued that Mr P’s complaint about the overdraft he had between October 2018 and April 2020 was made too late because he complained more than six years after some of the charges on the overdraft were applied, as well as more than three years after he ought reasonably to have been aware of his cause to make this complaint. Having carefully considered everything, I’ve decided not to uphold Mr P’s complaint. Given the reasons for this, I’m satisfied that whether Mr P’s complaint about some of the specific charges applied was made in time or not has no impact on that outcome. Having considered matters, I’m satisfied that it is reasonable to interpret Mr P’s complaint as being one alleging that the lending relationship between Mr P and Nationwide was unfair to Mr P as described in s140A of the Consumer Credit Act 1974 (“CCA”). I consider this to be the case as Mr P has not only complained about the circumstances behind the application of the individual charges, but also the fact Nationwide’s failure to act during the periods he alleges it ought to have seen he was experiencing difficulty caused ongoing hardship. I’m therefore satisfied that Mr P’s can therefore reasonably be interpreted as a complaint that the lending relationship between himself and Nationwide was unfair to him. I acknowledge the possibility that Nationwide may still disagree that we are able to look at the whole of Mr P’s complaint, but given the outcome I have reached, I do not consider it necessary to make any further comment or reach any findings on these matters. In deciding what is fair and reasonable in all the circumstances of Mr P’s case, I am required to take relevant law into account. As, for the reasons I’ve explained above, I’m satisfied that Mr P’s complaint can be reasonably interpreted as being about that his lending relationship with Nationwide was unfair to him, relevant law in this case includes s140A, s140B and s140C of the CCA. S140A says that a court may make an order under s140B if it determines that the relationship between the creditor (Nationwide) and the debtor (Mr P), arising out of a credit agreement is unfair to the debtor because of one or more of the following, having regard to all matters it thinks relevant: • any of the terms of the agreement; • the way in which the creditor has exercised or enforced any of his rights under the agreement; • any other thing done or not done by or on behalf of the creditor. Case law shows that a court assesses whether a relationship is unfair at the date of the hearing, or if the credit relationship ended before then, at the date it ended. That assessment has to be performed having regard to the whole history of the relationship. S140B sets out the types of orders a court can make where a credit relationship is found to be unfair – these are wide powers, including reducing the amount owed or requiring a refund, or to do or not do any particular thing. Given Mr P’s complaint, I therefore need to think about whether Nationwide allowing Mr P to use his overdrafts in the way that it did, resulted in the lending relationships between Mr P and Nationwide being unfair to Mr P, such that it ought to have acted to put right the unfairness – and if so whether it did enough to remove any such unfairness. Mr P’s relationships with Nationwide are therefore likely to be unfair if it allowed Mr P to continue using his overdrafts in circumstances where it ought reasonably to have realised

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that the facility had become unsustainable or otherwise harmful for him. And if this was the case, Nationwide didn’t then remove the unfairness this created somehow. Did Nationwide act fairly and reasonably when providing Mr P with his overdraft and increasing his limit on the occasions that it did between October 2018 and March 2024? We’ve explained how we handle complaints about unaffordable and irresponsible lending on our website. And I’ve used this approach to help me decide Mr P’s complaint. Nationwide needed to make sure it didn’t lend irresponsibly. In practice, what this means is Nationwide needed to carry out proportionate checks to be able to understand whether Mr P could afford to repay any credit it provided. Our website sets out what we typically think about when deciding whether a lender’s checks were proportionate. Generally, we think it’s reasonable for a lender’s checks to be less thorough – in terms of how much information it gathers and what it does to verify it – in the early stages of a lending relationship. But we might think it needed to do more if, for example, a borrower’s income was low or the amount lent was high. And the longer the lending relationship goes on, the greater the risk of it becoming unsustainable and the borrower experiencing financial difficulty. So we’d expect a lender to be able to show that it didn’t continue to lend to a customer irresponsibly. I understand that Nationwide agreed to Mr P’s applications after it obtained information on his income and carried out credit searches. And the information obtained indicated that Mr P would be able to make sufficient credits to clear the overdraft balance which could be owed at the respective times. On the other hand, Mr P says that he shouldn’t have been lent to or had his limit increased on the occasions that it was. I’ve considered what the parties have said. What’s important to note is that Mr P was provided with a revolving credit facility rather than a loan. And this means that Nationwide was required to understand whether limits of up to £2,500.00 could be repaid within a reasonable period of time, rather than all in one go. It’s fair to say that an overdraft limit of up to £2,500.00 required reasonably sized monthly credits in order to clear the full amount that could be owed within a reasonable period of time. Nationwide no longer has a record of its credit searches. That said, I’ve not seen any indication and neither has it been argued that any such checks would have shown Mr P had any significant adverse information – such as defaulted accounts or county court judgments (“CCJ”) – recorded against him. I also think that it is fair to say that Mr P’s account statements around the respective times show that he was in receipt of sufficient funds each month in order to clear an overdraft of up to £2,500.00 within a reasonable period of time. I fully accept it’s possible that Mr P’s position might have been worse than what it looks like on the information on his statements at the respective times. But this isn’t apparent from the information before me. I also think that it wouldn’t be fair and reasonable for me to use hindsight here, or say that Nationwide should have known this was the case at the time it was making its lending decisions. While I’ve thought about what Mr P has said about his gambling during this time, I can’t see that Nationwide ought to have considered that Mr P’s gambling meant he shouldn’t have been provided with these overdrafts. Indeed, by the time of the later applications, Mr P regularly repaying his overdraft in full and removing the facility meant that he had a repayment record that suggested an overdraft wasn’t harmful for him.

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As this is the case, I’m not persuaded that Nationwide acted unfairly when providing Mr P with overdrafts or increasing his limit on the occasions that it did between October 2018 and March 2024. I’ll now turn to setting out my thoughts on whether Nationwide acted fairly and reasonably in allowing Mr P to use his overdrafts in the way that he did. Did Nationwide unfairly allow Mr P to continue using his overdraft in a way that was unsustainable or otherwise harmful for him? Before I go any further, as this essentially boils down to a complaint that Mr P was unfairly charged as a result of being allowed to continue using his overdraft, I want to be clear in saying that I haven’t considered whether the various amounts Nationwide charged were fair and reasonable, or proportionate in comparison to the costs of the service provided. This is important as I note that Mr P has referred to the interest rate on his overdraft and ultimately, how much a bank charges for its services is a commercial decision. This isn’t something for me to get involved with. That said, while I’m not looking at Nationwide’s charging structure per se, it won’t have acted fairly and reasonably towards Mr P if it applied this interest, fees and charges to Mr P’s account in circumstances where it was aware, or it ought fairly and reasonably to have been aware that there was a clear reason it would have been unfair to do so. I’ve therefore considered whether such a reason existed which would have resulted in Nationwide charging Mr P unfairly. Having looked through the statements that I’ve been provided with, it’s clear that Mr P has used his overdrafts in the periods that he’s had them. I do accept that the rules, guidance and industry codes of practice all suggest that prolonged and repeated overdraft usage can sometimes be an indication of financial difficulty. However, it isn’t always the case that prolonged and repeated overdraft usage by a customer will always mean that they are, as a matter of fact, in financial difficulty. Indeed, if that were automatically the case, there would be an outright prohibition on revolving credit accounts being open ended, rather than there being a requirement for a lender to review how the facility is being used. I’ve therefore considered whether Nationwide acted fairly and reasonably towards Mr P, in this light. In considering this matter, I’m mindful that Mr P adding and then removing his overdraft on multiple occasions meant that he only had an overdraft on his account for periods of eighteen months, ten months and seven months. This limits the effectiveness of any reviews that would have taken place as these are only typically scheduled to take place on the anniversary of an overdraft being provided. The regulator also refers to a customer definitely falling within the scope of its repeat use rules where a customer is sometimes or continually overdrawn in the course of a 12-month period. So for the final two overdrafts, Mr P didn’t keep the facility long enough for me to be able to say that reviews should have taken place. I’ve nonetheless thought about whether there were specific reasons for Nationwide to act given Mr P’s specific circumstances. I think that it’s fair to say that where a customer didn’t get in contact and ask for assistance and where a customer was using their overdraft within the terms and conditions, there were more limited circumstances where a lender could and would be expected to act. One such

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instance where a lender would be expected to act is where it was clear that the customer was experiencing financial difficulty. Nonetheless, it would need to be objectively clear to the lender, rather than a matter open to interpretation, that the overdraft charges were clearly making things worse and they were harmful as a result. In the first instance, I can’t see that Mr P directly told Nationwide that he couldn’t afford to pay these charges, prior to his complaint. If he had done, Nationwide would have been obliged to act upon this. That said, even though Mr P didn’t contact Nationwide to say that he was in difficulty, I’ve considered whether Mr P’s account activity ought to have alerted it to this being the case. In order to help with determining whether it is objectively the case that a customer was experiencing financial hardship, the regulator has set out guidance on what it considers to be potential indicators of financial difficulty. This ‘Guidance on financial difficulties’ states that things such as a customer failing to meet consecutive payments to credit, being unable to meet their commitments out of their disposable income, having adverse credit or other insolvency information recorded against them, or being in a debt arrangement should be considered as potential signs of a customer being in financial difficulty. Having looked at Mr P’s current account statements during this period, I’ve seen no indication that any of the potential signs of financial difficulty contained in the guidance, were persistently present in his circumstances. I’ve also looked at Mr P’s incomings and outgoings as well as his overdrawn balances and determined whether it was possible for him to have stopped using his overdraft, based on this. I think that if Mr P was locked into paying charges in circumstances where there was no reasonable prospect of him exiting his overdraft then his facility would have been unsustainable for him, even where the indicators of financial difficulties I’ve set out above weren’t clearly present in his circumstances, when looking at the account transactions. However, I’ve noted that throughout the period of time I’m looking at, Mr P’s account was in receipt of credits that were sufficient to clear the overdraft within a reasonable period of time. Indeed, I’m satisfied that Mr P’s case isn’t one where a borrower was permanently marooned in their overdraft without any chance of escaping it. Not only is it clear that there were times where Mr P’s account returned to a credit balance, as I’ve already explained, Mr P was able to remove his overdraft on multiple occasions. I would also add that while I’m not seeking to make retrospective value judgements over Mr P’s expenditure, there are nonetheless significant amounts of non-committed, non- contractual and discretionary transactions going from Mr P’s account. This again makes it difficult to reasonably conclude that Nationwide should have seen that Mr P was struggling. I accept that Mr P did have other credit commitments at this time. But this in itself does not mean that he was reliant on credit to meet his essential expenditure. And it isn’t immediately obvious to me that Mr P was borrowing from unsustainable sources - such as payday type lenders, which although not contained in the regulator’s guidance is generally accepted to be an indication that a borrower could be struggling - in order to pay for the charges, or meet other committed expenditure either. Of course, I accept neither of these things in themselves (or when taken together) mean that Mr P wasn’t experiencing difficulty. But I don’t think that Mr P’s account conduct and overdraft usage obviously show that he was. And bearing in mind I’m satisfied that it is more likely than not that Mr P did not directly tell Nationwide that he was experiencing financial difficulty, that’s what I’d need to be persuaded of in order to uphold his complaint.

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Looking from the outside, Mr P’s repeated pattern of quickly settling his overdrawn balance in full and then removing the facility means that he was using them for relatively short periods. And his actions in themselves were demonstrating an ability to repay his overdrafts within a reasonable period of time. In these circumstances, Nationwide was reasonably entitled to conclude that Mr P was choosing to apply for and then use his overdrafts rather than it being the case that he had become reliant and needed them to manage. Therefore, I don’t think that Mr P was obviously locked into using his overdrafts and paying the charges for doing so. In my view, Mr P regularly exiting and removing his overdraft meant that Nationwide was reasonably entitled to believe that Mr P was choosing to use his overdraft in the way that he was, rather than it being a case that his financial circumstances left him with no choice other than to do so. Mr P’s other complaints with us and his reference to them I know that Mr P has queried how it is possible for us not to uphold this complaint when he’s had other complaints upheld by our service. I can to some extent understand why Mr P might find it strange that he has a different outcome on this complaint from his others which he perceives to be materially the same as his own. Although, I’ve noted that not all of the complaints he has referred to our service have been upheld in his favour. In any event, I think that it’s important for me to explain that we consider complaints on an individual basis and looking at the individual circumstances. I’m also required to consider the facts of a case and reach my own conclusion With this in mind, what will constitute a proportionate check will very much depend on the particular circumstances of the individual application. A proportionate check, even for the same customer, could look different for different applications – even if those applications are with the same lender. Furthermore, what a lender would learn about a prospective borrower had proportionate checks been carried out would also be determined by what the lender can reasonably be expected to have found out about the borrower in the first place. So caution should be exercised when comparing cases and the outcome of Mr P’s other cases cannot and do not bind me into reaching the same conclusion on this case. That said, consistency is important and with a view to providing some clarity and reassurance to Mr P, it might help for me to explain that there are some key differences between this complaint and Mr P other cases. Firstly, one of Mr P’s other cases, which I suspect given the outcome here he’ll have more difficulty reconciling with this one, involved a chain of loans almost all of which required monthly payments in excess of what a sustainable credit to repay his overdrafts in this case was. From what I’ve been able to see most of the upheld loans had monthly payments of over £600. Secondly, the ombudsman in Mr P’s loan case stated that Mr P’s repayment record and his applications for new loans before having repaid previous ones, not only made him a repeat borrower, but it was also highly erratic. In this case, during the periods I’ve been able to look at, Mr P owed Nationwide (through having an overdrawn balances) for much shorter periods of time. He was therefore using his overdraft as expected and his overdrafts being repaid within months meant that the credit was cleared before it became unsustainable or otherwise harmful for him. That was never the case in the loan complaint Mr P referred to us. All of this not only impacted on what it would have been proportionate for the lender to have checked at the time of Mr P’s applications in his other cases, but also what it would have found out about Mr P’s ability to make his repayments at the respective times. For the sake of completeness, I would also add that as corrections in relation to Mr P’s other borrowing have now been made, in relation to his other complaints, he is effectively in the

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position that he would be in had he not had that credit. I therefore don’t think that it would be fair and reasonable for me to now ‘double count’ these upheld cases, by considering whether Mr P’s could afford to repay this overdraft within a reasonable period of time (which he did manage to do), as well as repay all of his other credit, when I know that he’s already been placed in the position of not having that credit. Double counting Mr P’s other complaints in this way, would seek to place him in the position he would be in had he not been lent to at all, because Mr P was in a position where he shouldn’t have been lent to in any circumstances. I don’t think that this is the position that reasonable and proportionate checks will have shown that Mr P was in, at the time he was provided with and allowed to use his final three overdrafts. Equally, as I’ve explained above, the information I’ve been provided on this case has not persuaded me that this was the position that Mr P was actually in either. As this is the case, while I’m not required to replicate the outcomes reached on other cases, I nonetheless don’t consider that my answer on this complaint is incompatible or inconsistent with the ones Mr P has received on some of his other cases, notwithstanding the differing outcomes. In these circumstances, I don’t think that it was unreasonable for Nationwide to have proceeded adding the charges that it did. I’ve therefore not been persuaded that Nationwide created unfairness in its relationship with Mr P by allowing him to use his overdraft in the way that he did. Based on what I’ve seen, I don’t find Nationwide treated Mr P unfairly in any other way either. In these circumstances, I don’t find that the relationship between Mr P and Nationwide was unfair to Mr P. Overall and having considered everything, while I can understand Mr P’s sentiments and appreciate why he is unhappy, I’m nonetheless not upholding this complaint. I appreciate this will be very disappointing for Mr P. But I hope he’ll understand the reasons for my decision and that he’ll at least feel his concerns have been listened to. My final decision For the reasons I’ve explained, I’m not upholding Mr P’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr P to accept or reject my decision before 14 April 2026. Jeshen Narayanan Ombudsman

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