Monzo Bank Limited - Payment Dispute

[Intrepid]

It's time to add Monzo Bank Limited to the Bank and Finance Subforums.

I received the e-mail (attached below) from Monzo Bank Limited which included the FCA attachment I have compiled underneath their e-mail.

1. Does their e-mail constitute a "default notice" pursuant to the Consumer Credit Act 1974?

2. Are they required to issue a default notice prior to reporting the account as defaulted to credit reference agencies?

3. It is my understanding that once an account is closed it should no longer be reported on, the account was closed with a balance of £0.00.
 

Monzo - Email 04.10.22 - Redacted.pdf

[dx100uk]

1. no a DN must be in the right format consummate to section 87 of the CCA and be served by snail mail letter .

2. if they are registering a defaulted date in the summary line of the account that ALL can see - yes, but not if simply registering a D in the calendar section which only the debtor and the Original creditor can see - though a D will affect your score.

3. no that is not true.

dx

 

 

[Intrepid]

Thank you DX.

Just to be clear the disputed sum has been taken from a closed current account, does this still fall under the scope of consumer credit?
 

1.Section 88 of the act makes it clear a default notice must be in the prescribed form but I cannot find any detail as to the prescribed form.

The Consumer Credit (Agreements) Regulations 1983 make reference to information that must be contained within a default notice under Schedule 2 of the same Act,  however Schedule 2 is now blank.

From my dealings with Monzo I expect they will be under the seemingly incorrect impression that this constitutes service of a default notice, which will be a point of contention going forward.

2. Presumably there is no way of knowing their intentions before hand and it will only be known upon obtaining a credit report after the date in their email?

[dx100uk]

they cant serve a DN via email, 

section 87 has the format so does every default notice already uploaded here.

and what 'sum' are you talking about?? a closed account is still covered by the CCA 

however i now notice this is a bank account not a card nor loan so other than i think section 5 , its not covered by the CCa anyway.

dx

 

 

 

[Intrepid]

Section 87 covers the need for default

The sum is in reference to a sum received by a foreign merchant which was disputed, immediately returned but then later paid to the merchant by Monzo after the account was closed.

It appears as if Monzo are acting as if they are providing credit, however no credit agreement was sought or agreed to, there was never an overdraft on the account.

This feels very parking company-esque where they are doing everything to make it appear as if they are issuing a default notice without actually doing so.

Edited October 9, 2022 by Intrepid

[FTMDave]

Open.

[dx100uk]

open again...

dx

[Intrepid]

The payment portion of our dispute is drawing to a close and is in its final death throws.

Despite being unable to agree terms before a previous hearing was adjourned, Monzo have made a further offer to settle matters between us.

I am looking for a sense check for the response I have prepared.

Attached in a single PDF is a copy of:

Monzo's offer
My draft reply
Draft orders and schedules for settlement of two on-going claims.

Binder1 - Redacted.pdf

[dx100uk]

i pers can see any issue with your proposed tomlins.

i agree they should removed the account(s) totally for all 3 cra ref agencies.

i will guess the +£1k claim is in relation to the adverse entries and the refusal of your mortgage application...as this sum tallies with similar claims for such.(£1k per entry)

 

[Intrepid]

Thank you, I realise now that it makes sense to include the CRA clause in both schedules.

The £1,000 is a claim for distress, it was issued long before any mortgage applications.

If it causes me a loss then they have been notified that a further claim will come.

[Intrepid]

I sent Monzo a CCA request, it was returned with a written paper slip indicating the reason it wasn't actioned is because the account was closed.

Is account closure a sufficient reason not to respond to a CCA request?

[dx100uk]

if the consumer credit agreement is terminated, yes. the Act is no longer in force.

why did you need a copy of the agreement?

dx

 

[Intrepid]

I don't, I sent the request to prove the account was never subject to a CCA.

Monzo still report the current account as money owing but how can they be lending me money, on a closed account, that was never subject to a CCA, and which no overdraft was assigned?

[dx100uk]

3 hours ago, Intrepid said:

Monzo still report the current account as money owing but how can they be lending me money, on a closed account, that was never subject to a CCA, and which no overdraft was assigned?

 

On 08/10/2022 at 13:49, Intrepid said:

3. It is my understanding that once an account is closed it should no longer be reported on, the account was closed with a balance of £0.00.

 

On 09/10/2022 at 01:50, dx100uk said:

3. no that is not true.

nicked from an old post by rory32

Overdrafts come under section 10 of the Consumer Credit Act.

 

10.—(1) For the purposes of this Act—

(a) running-account credit is a facility under a personal credit agreement whereby the debtor is enabled to receive from time to time (whether in his own person, or by another person) from the creditor or a third party cash, goods and services (or any of them) to an amount or value such that, taking into account payments made by or to the credit of the debtor, the credit limit (if any) is not at any time exceeded; and

(b) fixed-sum credit is any other facility under a personal credit agreement whereby the debtor is enabled to receive credit (whether in one amount or by

instalments).

(2) In relation to running-account credit, " credit limit" means, as respects any period, the maximum debit balance which, under the credit agreement, is allowed to stand on the account during that period, disregarding any term of the agreement allowing that maximum to be exceeded merely temporarily.

(3) For the purposes of section 8(2), running-account credit shall be taken not to exceed the amount specified in that subsection (" the specified amount") if—

(a) the credit limit does not exceed the specified amount; or

(b) whether or not there is a credit limit, and if there is, notwithstanding that it

exceeds the specified amount,—

(i) the debtor is not enabled to draw at any one time an amount which, so far as

(having regard to section 9(4)) it represents credit, exceeds the specified

amount, or

(ii) the agreement provides that, if the debit balance rises above a given

amount (not exceeding the specified amount), the rate of the total charge for credit increases or any other condition favouring the creditor or his associate comes into operation, or

(iii) at the time the agreement is made it is probable, having regard to the

terms of the agreement and any other relevant considerations, that the debit balance will not at any time rise above the specified amount.

 

Overdrafts have part V exemptions (form and content) from the Act. This does not mean that they are exempt from the Act. The credit agreement would be in the form of a letter from the bank stating the aount of credit, the APR, charges and cancellation rights. This type of agreement would not be signed by the debtor.

 

To help clarify matters, this is an extract from a Court case Coutts v Sebestyen and this part is part of the summing up by the Judge in relation to overdrafts and The Consumer Credit Act-

 

THE ACT

It is common ground:

 

 

(a) that the agreement for an overdraft of £2,000 in the terms of Coutts' letter dated 5 April 2002 was a regulated debtor-creditor agreement within the meaning of sections 8 and 13© of the Act, providing for 'running-account credit' within the meaning of section 10(1)(a) of the Act (in effect, a revolving credit within the agreed credit limit of £2,000); and

 

 

(b) that, as such, it was subject to the requirements of Part V of the Act (including the requirements as to documentation set out in sections 57 to 63 of the Act) save and in so far as it was excluded or exempted from such requirements.

 

Section 65 in Part V of the Act provides that an "improperly executed" regulated agreement is unenforceable by the creditor without a court order. It is common ground that a regulated agreement is "improperly executed" for this purpose if the requirements of sections 57 to 63 have not been complied with.

 

Section 74 of the Act provides for the exclusion of certain agreements from Part V. It provides as follows (so far as material):

 

"74. – (1) This part …. does not apply to –

 

(a) ….

(b) a debtor-creditor agreement enabling the debtor to overdraw on a current account, …

© ….

(2) ….

(3) Subsection 1(b) … applies only where the OFT so determines, and such a determination –

(a) may be made subject to such conditions as the OFT thinks fit …

(b) ….

(3A) …. in relation to a debtor-creditor agreement under which the creditor is …. a bank …. the OFT shall make a determination that subsection 1(b) above applies unless it considers that it would be against the public interest to do so.

(4) …."

Part VI of the Act relates to matters arising during the currency of credit agreements. Section 82 in Part VI, which is headed 'Variation of Agreements', provides as follows (so far as material):

"82. – (1) ….

 

(2) Where an agreement (a "modifying agreement") varies or supplements an earlier agreement, the modifying agreement shall for the purposes of this Act be treated as –

 

 

(a) revoking the earlier agreement, and

(b) containing provisions reproducing the combined effect of the two agreements,

and obligations outstanding in relation to the earlier agreement shall accordingly be treated as outstanding instead in relation to the modifying agreement.

 

 

(3) ….

(4) If the earlier agreement is a regulated agreement for running-account credit, and by the modifying agreement the creditor allows the credit limit to be exceeded but intends the excess to be merely temporary, Part V …. shall not apply to the modifying agreement.

(5) ….

 

(6) ….

(7) …."

 

 

THE DETERMINATION

 

The Determination (which is signed by the Director of Fair Trading) is made under section 74(3) of the Act. I set it out in full:

"1. Under the powers conferred upon me by Sections 74(3) and (3A) and 133 of the Consumer Credit 1974, I, the Director General, being satisfied that it would not be against the public interest to do so, hereby revoke with effect from 1st February 1990 the Determination made by me in respect of Section 74(1)(b) and dated 3 November 1983 and now determine that with effect from 1st February 1990 Section 74(1)(b) shall apply to every debtor-creditor agreement enabling the debtor to overdraw on a current account, under which the creditor is a bank.

 

 

2. This Determination is made subject to the following conditions:-

 

 

(a) that the creditor shall have informed my Office in writing of his general intention to enter into agreements to which the Determination will apply;

(b) that where there is an agreement between a creditor and a debtor for the granting of credit in the form of an advance on a current account, the debtor shall be informed at the time or before the agreement is concluded:

- of the credit limit, if any,

- of the annual rate of interest and the charges applicable from the time the agreement is concluded and the conditions under which these may be amended,

of the procedure for terminating the agreement;

and this information shall be confirmed in writing.

© that where a debtor overdraws his current account with the tacit agreement of the creditor and that account remains overdrawn for more than 3 months, the creditor must inform the debtor in writing not later than 7 days after the end of that 3 month period of the annual rate of interest and charges applicable.

3. In this Determination the terms 'creditor' and 'debtor' shall have the meanings assigned to them respectively by Section 189 of [the Act]. The term 'bank' includes the Bank of England and banks within the meaning of the Bankers' Books Evidence Act 1879 as amended."

 

From the Consumer Credit Act 1974:

 

Facts. The manager of the C Bank agrees orally with D (an individual) to open a current account in D’s name. Nothing is said about overdraft facilities. After maintaining the account in credit for some weeks, D draws a cheque in favour of E for an amount exceeding D’s credit balance by £20. E presents the cheque and the Bank pay it.

Analysis. In drawing the cheque D, by implication, requests the Bank to grant him an overdraft of £20 on its usual terms as to interest and other charges. In deciding to honour the cheque, the Bank by implication accept the offer. This constitutes a regulated small consumer credit agreement for unrestricted-use, fixed-sum credit. It is a debtor-creditor agreement, and falls within section 74(1)(b) if covered by a determination under section 74(3).

 

Facts. F (an individual) has had a current account with the G Bank for many years. Although usually in credit, the account has been allowed by the Bank to become overdrawn from time to time. The maximum such overdraft has been is about £1,000. No explicit agreement has ever been made about overdraft facilities. Now, with a credit balance of £500, F draws a cheque for £1,300

 

Analysis. It might well be held that the agreement with F (express or implied) under which the Bank operate his account includes an implied term giving him the right to overdraft facilities up to say £1,000. If so, the agreement is a regulated consumer credit agreement for unrestricted-use, running-account credit. It is a debtor-creditor agreement, and falls within section 74(1)(b) if covered by a direction under section 74(3). It is also a multiple agreement, part of which (i.e. the part not dealing with the overdraft), as referred to in section 18(1)(a), falls within a category of agreement not mentioned in this Act.

 

Facts. Under an oral agreement made on 10th January, X (an individual) has an overdraft on his current account at the Y bank with a credit limit of £100. On 15th February, when his overdraft stands at £90, X draws a cheque for £25. It is the first time that X has exceeded his credit limit, and on 16th February the bank honours the cheque.

Analysis. The agreement of 10th January is a consumer credit agreement for running-account credit. The agreement of 15th-16th February varies the earlier agreement by adding a term allowing the credit limit to be exceeded merely temporarily. By section 82(2) the later agreement is deemed to revoke the earlier agreement and reproduce the combined effect of the two agreements. By section 82(4), Part V of this Act (except section 56) does not apply to the later agreement. By section 18(5), a term allowing a merely temporary excess over the credit limit is not to be treated as a separate agreement, or as providing fixed-sum credit. The whole of the £115 owed to the bank by X on 16th February is therefore running-account credit.

 

Facts. The G Bank grants H (an individual) an unlimited overdraft, with an increased rate of interest on so much of any debit balance as exceeds £2,000.

Analysis. Although the overdraft purports to be unlimited, the stipulation for increased interest above £2,000 brings the agreement within section 10(3)(b)(ii) and it is a consumer credit agreement.

dx

[Intrepid]

Thanks, when this goes in front of a judge this could well be some of the case law Monzo rely upon.

I have only skim read your post above so far but all of the cases and analysis relate to accounts which hold an existing authorisation for an overdraft facility with the exception of the first example.

I understand Monzo may have offered me a current account where a basic bank account would have sufficed, but that a current account with no overdraft may fall under the CCA section quoted above.

My understanding from reading the FCA handbook is that the use of an unauthorised overdraft should be to the benefit of the account holder, i.e. to ensure the gas isn't shut off for the sake of a missed payment. It is not intended to be used by a bank that cannot be bothered to complete an arbitration process.

In the first example D drew a cheque which was later honoured. In my case the payment was subject to a dispute, it was not on offer on my behalf for the bank to pay the money.

Monzo in default of its written mastercard chargeback policy, didn't even consider to continue the arbitration process in my view because it suited its own interests and not those of its customer which was its legal obligation.

Edited March 3 by Intrepid