Overdraft taken away despite agreed gradual reduction

Hi,

I’m on a debt management plan and have been paying my Monzo overdraft off for several months. When I initially went on the plan, I messaged Monzo and asked if they would take my overdraft away. They said no, we’ll reduce it by the amount of your payments to us each month. This has been happening as they said for several months as I get paid then the money slowly gets eaten up by bills etc.

Today I went to go transfer my rent, to find Monzo has reduced my overdraft by over £1000, leaving me unable to pay my rent or bills.

They haven’t given me any prior warning, and this goes directly against what they said in a chat previously (which I have a screenshot of and is still in the chat) which was that they’ll slowly reduce my overdraft by around £8 a month.

Can Monzo do this after telling me they’ll slowly reduce? Why would they suddenly take it away?

I haven’t missed any payments or anything.

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From my understanding they continually refine their lending criteria, so I imagine this is what you’ll be told if you were to ask them.

If you were on a debt management plan however, I think that’s a little bit different. As long as you kept your end of the agreement, they should keep theirs.

Have you messaged them in app to ask?

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Do you mean that they removed your available overdraft?

I’m not an expert in lending but from what I understand once you enter into a debt management arrangement, the bank will stop any further lending and the plan is to allow you to pay off any of your arrears – otherwise if they allowed you to continue using credit it might never get anywhere.

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I agree and from my understanding of what the OP is explaining, they arranged for the overdraft limit to be gradually decreased. However, it seems that Monzo accelerated this beyond what was set out in the debt management plan.

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It is always best to use an alternative bank (which you hold no debts with) to carry out your day to day banking in order that your funds are kept for your bills and essentials and also to build a safety net of savings.

Monzo is technically within its rights to remove your borrowing, whether that’s morally acceptable, that’s an entirely separate matter.

I would speak with your debt management provider (if this is Monzo, move to someone who is not your lender such as StepChange), as you should not be placed in further hardship by entering the plan, its purpose is to improve your situation.

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Thank you. I won’t make that mistake again, but I thought after several months of everything going smoothly and me making payments, slowly reducing my overdraft, I could trust it to be in there. I only kept some money in there for rent.

I’m waiting for the “specialist team” to get back to me. So far I haven’t had any help or solutions from the regular team.

The agreement you had in place was to pay down your overdraft, which as you quote, reduces your limit by that amount each month.

You agreed to do that before they put it in place (I’ve done that job so know how it worked).

That means the amount you pay back is no longer available, and you won’t be able to increase it back by that amount.

Edit: this also means anything over the limit amount you were paying back gets removed, they aren’t going to waive all fees and interest, and enter you to a plan, as well as let you borrow to what your limit was originally.

Before entering the plan, you likely provided an income and expenditure, which would have included your rent, bills, essentials and other monthly spend, before submitting an amount available to go towards your overdraft.

This means your rent should already be affordable, as you dictated to monzo, before entering the plan.

So monzo are not accountable here, either you entered incorrect details on the I&E, or weren’t honest about your spending bringing this end result.

You’ll have to speak with your landlord or adjust your other spending to accommodate your rental payments.

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I don’t think you understand. For months I’ve been making payments to step change, when Monzo receive this, they add the money to my account as a suspense payment, at the same time reducing my overdraft by that amount. So every month my overdraft is £8.61 less.

I got paid into my Monzo account and was going to pay rent out of that, so there was over £1000 there. Monzo got rid of my overdraft with no warning, swallowing up my rent money.

I have it in writing from them that they would take my overdraft away by £8.61 a month, not over £1000 at once.

I do understand, worked many years collections and recoveries (monzo part of that).

I think it’s you that doesn’t understand when entering into a repayment plan because you can’t afford the debt, the company isn’t going to allow you to run up further debt when you already told them you can’t afford the current amounts.

Let’s say your limit was £1,500.

You spent £500 and told Monzo you can’t afford to pay that back.

You come to arrangement of £8pm, which Monzo accepts.

Monzo then reduced your overdraft limit to your outstanding balance amount you said you can’t afford to pay.

Your new overdraft limit is that of the balance you couldn’t afford, £500.

They aren’t going to then let you spend £1000 again, when you already said you can’t afford the £500.

To me it sounds like:

OP had a debt of X (where X > £1000, let’s say £1,500)

OP has been paying this off £8 a month which reduced their available overdraft by the same amount.

OP received a payment of £1,000 into their account. Monzo saw it and thought “cool, free money!” and took the £1,000 out of OP’s account.

They now have £1,000 less debt (let’s say £500), but they’ve also been forced to make an involuntary repayment towards their debt that they could not afford (and that was not part of the DMP).

It shouldn’t have happened and OP needs to make a complaint, making it clear what impact this had, and hopefully Monzo will be able to address it.

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Without all the figures, and amount that got paid in, along with balance owed last month, it’s hard to tell.

Seems a boo-boo on both sides, paying into an account you owe debt with, and then an automatic process removing the overdraft once enough funds are available.

Think these processes were manual when I was there (absolute chore).

I’m not familiar with how collections works but unless the agreement with OP stipulated that the account cannot be used at all, I don’t see how any blame could be apportioned to OP.

That’s exactly what has happened @ndrw

I’m waiting for a response from monzos specialist team. Any idea on wait times?

Sadly Monzo support times can vary hugely. Hopefully they’d see this as a bit of an urgent one.

I would also raise a complaint (make it clear that it is a complaint) and explain it clearly what impact this has on you – for instance if you cannot pay rent, or similar.

Be honest, factual and clear – hopefully if you’re negatively impacted they might put you in touch with the vulnerable customers team or similar?

A complaint will take up to 8 weeks to resolve. The specialist team should contact you before then though.

@ndrw thanks. They initially said they were putting me through to wellbeing but I am yet to hear from them.

I’ve emailed them an official complaint too and told them how it’s impacted me (being unable to pay my rent when I have a child too). I’ve said if they can’t resolve it, can they write me a final response so I can take it to the financial ombudsman.

Hoping there’s some resolution soon.

It sounds to me like there’s a condition that - if ever you bring your account back into the positive while on one of these plans - the debt would be automatically settled and therefore overdraft removed. I imagine though this wasn’t made clear, and hope you get the issue resolved

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Just trying to get my head around a few bits.

Did you assume your full overdraft limit would remain the same, but they just pay down the balance outstanding?

Or did you understand that your balance is your limit now, and they reduce that every month to zero when it’s paid off?

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The original post is a little confusing, which got me initially too. The overdraft limit doesn’t matter here.

What happened is OP had money paid into their account, designated to be used for rent payment. Monzo took that money automatically as a part repayment for any debt owed – even though the repayment schedule agreed was £8 a month.

I read this as being independent of what happened with the £1000.

My understanding is if you’re overdrawn and you’ve had lending facilities removed from your account any money that’s been paid into the account will reduce the amount that you’re overdrawn. You also won’t be able to borrow additional cash.

The agreement to repay £8/month is independent of that and basically saying ‘Monzo won’t send in the recovery agents if you keep up these repayments’.

This definitely won’t be the first time this has happened, and I would hope that Monzo would be understanding and allow the additional borrowing.

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@Carlo1460 no, the agreement was that they would reduce my overdraft by the payments made to them each month, so each month my overdraft limit would be less than it was the month before, even if it was at its max