Monzo Flex: Nickel and diming

As both an investor and a user of Monzo, I’m incredibly worried about this trend from this bank of nickel and diming their customers for ever penny they can squeeze out of their customers. You come off like a child scavenging down the back of the sofa for a few extra pennies, it’s pathetic.

Here’s my thesis: Monzo flex is simply a way for the bank to squeeze a year’s worth of interest payments from users in one go. It is designed explicitly to maximise these payment, and as a result, is both predatory in nature and a worse deal than a traditional credit card.

I made a payment using Monzo Flex as I wanted to trial the feature. I paid through the card, which meant I had 24 hours to select the length of repayment. No where in the notifications was it mentioned that I would be put on the most expensive plan if a choice was not made in time. I had actually assumed that the payment would be charged as a non flex payment. I don’t even remember it being mentioned in the onboarding how this situation would be dealt with. I’m now apparently committed to paying a year’s worth of interest on a payment that is being refunded tomorrow.

Why is it not possible to select a default payment plan for all payments that come through the card? This tool has been designed in a way that is deliberately cumbersome. You have to select the details of every individual payment, making it far more likely that something falls through the cracks and you’re now on the hook.

And what happens if you don’t select a plan in 24 hours? Oh well of course you wanted to select the longest payment plan, which of course just happens to be the one Monzo make the most money on. Just a coincidence that.

The flex in Monzo Flex is not for the benefit of the user. If you guys are that desperate for my £3 worth of interest, just do another crowdfunding campaign or something. You don’t have to spearhead such pathetic business practices. Just make a good product.

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Isnt this literally every bank in the uk though?

I too question the ethics of the whole buy now pay later trend that is taking off (I think it will promote bad saving and budgeting mindsets within folk) but I don’t think Monzo are alone in this.

They have to make a profit somehow, much like all banks.

What would you like to see it do differently?

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Defaulting to 12 instalments is made very clear in the Credit Agreement which you have to sign to be able to use the service.

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Hey @emekao :wave:

I’m sorry to hear that you’re unhappy about the Monzo Flex product you have - Here’s a helpful link I believe would be of use to you regarding choosing instalment plans - This also will have been in the terms&conditions before you opened the flex product.

Here is also another link with information on everything Flex, I hope this also answers any other questions you have?

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I immediately switch off when I see this :eyes::rofl:

Anyways credit checks are carried out in the 1st place, unlike other BNPL companies (at the moment)

Banks make money by offering out credit products.

Nothing is hidden by Monzo, when you sign up it tells you this upfront, that if you don’t select a term it defaults to 12 months

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The more prominent issue being highlighted here, to me, seems like in the instance of refunds, you’re still charged interest on the initial purchase. I don’t know if this is because refunds go back to your monzo account and so don’t write the debt off, but with a traditional credit, if something is refunded, you don’t pay any interest on that purchase at all, because it’s as if you never made it. Any interest you’ve already payed should get refunded too.

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To explain a few points…

  • The original logic for “defaulting to 12 instalments” rather than 3 if you don’t pick a plan is that it’s worse to take 1/3rd of a payment from a customer what want’s to have a 12 month plan than the other way around. This is because for that customer, having a larger payment taken from their current account than they’re expecting in a month could make their financial position worse. The risk of “defaulting to 12 instalments” for the customer who wants a 3 month interest free plan in reality is very small - if it happens then you can just pay the plan off for free before you actually accrue any interest - or if you wait a few days it will cost a few pence - trust me when I say we’re not doing this to accrue a few pence of interest!
  • As others have mentioned - it’s in the T&C’s - we’d also send you 4 notifications and a text message before “defaulting to 12 instalments” - In which we’ll tell you that we’ll default to 12 if you don’t pick a plan. (You can see the details here)
  • I too question the practice of some BNPL providers. But rest assured - unlike other BNPL providers, Flex is fully regulated under the consumer credit act, we adhere to the consumer credit sourcebook and we have regular check in’s with the FCA where we’ll run most major product decisions past them. Put another way - Flex is regulated in the same as any other credit card in the UK.
  • We don’t charge missed payment fees or other hidden fees that don’t have to be included in the APR - which pretty much every other credit card (and a lot of other BNPL providers) in the UK does. This is true across all our products (flex, loans and overdrafts). To see the impact of this you can checkout Clearpay’s annual report where they made £15.7 million in revenue from missed payment fees last year (which was ~33% of their total revenue) despite advertising interest free loans on their website. If we really wanted to “squeeze every penny from customers” it’d be pretty easy by slapping on a missed payment fee of £12 rather than accruing a few pence of interest from defaulting to 12 months! :slightly_frowning_face:

This all said, we’re currently looking into the mechanics of “defaulting to 12 instalments” along with a couple of other bits - and no i won’t say more on this :wink:

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I could be wrong but I’m sure it does on the countless reminders and notifications you get reminding you to pick a plan.

Why didn’t you just pick one, either at the time you made the transaction or after one of the many notifications you recieved? You must have planned the purchase and that it was going to be flexed?

There’s a comment from someone at Monzo explaining why it defaults to 12 months. Im sure people would complain either way if it defaulted to 3 month and took a huge chunk of “the money they need to feed their kids” as first payment.

Edit: beaten to it above :rofl:

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I think allowing people to set default payment periods would go some way to resolve this. When I spend on a card, I should know what rate of interest I’m going to pay at a minimum. Its not enough to say the user should have told us in 24 hours. There are loads of circumstances where this could be difficult / not possible. Not to mention the difficulty in reporting terms for numerous transactions at the same time. Like I said, as currently built, it’s done in a way to encourage you to forget about it and pay the max amount of interest. I believe that to be deliberately predatory.

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Don’t use it then?

Or now you know, or have been reminded of how it works, you could use it without the same frustration next time? It can’t be that difficult to amend a transaction in-app with all the prompts they give.

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Being so dramatic doesn’t help your argument.

What about when you set your default to 3 months and then it takes all your food money because this time you wanted it to be 12 months?

It’s set like this for a reason.

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I appreciate the comprehensive answer on this one. I wasn’t actually aware that paying off the loan early would reduce the interest. The way the program is advertised it suggested at least to me that there wouldn’t be an effect. It was only after stating that I would be refunding the payment to customer service that I was told this and paying off early would reduce the interest due.

All I’m saying is give the user the choice to choose. Why would that be a bad thing?

You get plenty of notifications and plenty of time to make your choice.

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Is your day job politician? :joy:

That’s a good defence of Monzo’s current approach, but it doesn’t really answer the question that was asked! Matt Hancock would be proud.

I don’t think it’s a bad thing, but I’m not sure the solution is that clear cut either.

I think the entire approach would need a bit of a rethink in order to arrive at a solution a bit more elegant.

I’d propose they just made the first 3 months interest free as standard, regardless of which plan you take. Seems like the simplest fix to this problem to me, but I’m sure that would come with its own caveats too.

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Imo if you are serious about this, I’d do the following:

Make a formal complaint to Monzo. You might want to explain that you weren’t aware of the default being 12 months period, that you felt this was unfair, and/or 24 hours just not giving you enough time, and/or anything else.

Monzo will be almost certain to reject your complaint. But after they’ve done that you can then go to the financial ombudsman and ask them to consider the complaint. If nothing else I think it’d be interesting to see them rule on these sort of matters. (Personally I’m not convinced that Monzo defaulting people into an interest bearing 12 months period is in keeping with their requirements to treat customers fairly - especially given there are only 24 hr to make another choice - but I’m not an expert in these matters)

But it won’t be a quick thing. Afaik, while I would expect monzo to react quickly, the financial ombudsman has a very long backlog at the moment, so expect it to take months not weeks.

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I haven’t joined Flex so haven’t read the T&C but from a consumer law perspective, saying something is in the T&C doesn’t make it legal.

I would expect a T&C like that to be specially drawn to a customers attention, otherwise it could well be considered an unfair term under the Consumer Rights Act.

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You missed off the rest of the sentence…

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No - you legally need to specifically draw the customers attention to certain T&C when they are agreeing the contract.

Just doing it afterwards, would not be legally sound/defensible.

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It’s hard to recall, but I’m pretty sure they do during the onboarding process. This stuff was pretty clear, up front.

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