I understand that part. How about dormant overdrafts? Do they have impact on their operations to warrant their cancellation?
If they allocate a certain sum for delinquent accounts based on overdraft limits or have insurance to cover potential loss with coverage limits and premiums on the policy dependent on the potential amount at risk, you could argue that the dormant accounts are preventing them offering overdrafts to others, that’s assuming they only have £X worth to give out. If they do not have a monetary restriction on their potential lending then this scenario would not apply.
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Thanks for the explanation. Monzo’s response as to which scenario applies would be appreciated but I am not sure if these practices are to be discussed publicly by them on this forum
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One of the things in chat is they asked if you would have financial difficulty. I think an easy guage of scale for financial difficulty is “has the overdraft been used”.
They may be planning to gradually reduce those user’s overdrafts (potentially to 0), but wait for the next billing cycle or their pay day.
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My unemployed wife got £1000 overdraft from Monzo… I got only £100 and Monzo refuses to increase it… They force me to move all my income.
I applied for NatWest account and been pre-approved for £4000 overdraft…
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I can’t say that makes any sense.
Hopefully, this is not the real reason
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No, the losses aren’t related to withdrawing overdraft facilities. Ultimately, the more people take overdrafts, the faster the losses will be eliminated and the quicker the bank will become profitable.
I have a Monzo overdraft myself which I’ve never used and it’s still available to me now, so it’s not just a cross-the-board reduction. It must be related to underlying credit scoring or changes to their risk appetite/model.
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Surely increased losses is something that would directly impact upon their risk appetite/model ?
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Probably the latter of those two.
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The losses (for Mar 17-Feb 18 IIRC) were mainly from running the prepaid cards, having far more users to service than the previous years and high FX charges. In the next financial year, there will be hardly any prepaid related costs and lower losses on FX due to the charges they now make on withdrawing over £200/month cash overseas (all the heavy users seem to have migrated to Starling which still has it free for them).
I personally don’t plan to use the overdraft, but I suspect they’ll develop other lending products (e.g. borrowing say £1k and paying over 3/4 months) which will appeal to me and others further down the line.
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If someone that has had their overdraft withdrawn can check their credit file search history they would be able to confirm if monzo has completed any subsequent searches of their credit file.
If they have not… It is possible to then conclude it is not something on the customer side that has resulted in this change
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Monzo do complete soft searches regularly without further consent from the account holder; it’s actually something I am not keen on.
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Just checked my own noodle credit file and there has not been a soft search from Monzo. However, I do not have an overdraft
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Soft credit checks are carried out only for those with overdrafts, I presume.
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That is why it would be handy if someone that has had an overdraft withdrawn can confirm if any searches have been completed by Monzo.
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If no searches were carried out by Monzo, yet the dormant overdraft was removed then @anon44204028 's explanation for the possible rationale starts making a lot of sense:
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No. They are done as a matter of course. A hard check is only done after consent.
Edit: this was discussed a while back here
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Does anyone know how frequently are those checks done by Monzo?
Does it matter? Soft searches do not affect your file (because other companies do not see the soft searches).
Using a comparison website will spam your file with soft searches.
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