Barclays Bank UK PLC · DRN-3913683

The complaint A company, which I’ll refer to as T, complains about how Barclays Bank UK PLC (a) handled capital repayment holidays which had been agreed on its loans, and (b) subsequently managed T’s borrowing, in both cases affecting T’s credit rating and its ability to access other finance. Mr T, the director of T, brings the complaint on T's behalf. What happened This complaint falls into two parts. Background to part (a) In March 2020, T sought to take out a Coronavirus Business Interruption Loan (CBIL) with Barclays. Barclays declined the application. However, in May 2020 Barclays approved capital repayment holidays (CRHs) on T’s three existing loans. In September 2020, T’s relationship manager at Barclays became aware that one of T’s loans was in arrears, indicating that the CRH for this loan hadn’t been properly processed. When he looked into things, he discovered that all three loan accounts were in the same position. None of the CRHs had been properly processed, resulting in all three loan accounts recording missed payments. Mr T understood that two of the CRHs had been properly processed, and only one CRH had been mis-processed. However, Barclays has explained that, although all three CRHs had not been processed, T’s credit reference agency (CRA) file only recorded one account as in arrears as the other two accounts were not required to report to the CRAs. Barclays identified that the cause of the problem was that Mr T had cancelled the direct debits on all three loan accounts back in March, which had blocked the CRHs from going through. Mr T says that he cancelled the direct debits by phone, so Barclays must have been aware. He also says that he made his relationship manager at Barclays aware at the time, and that he mentioned it to Barclays again in June when he realised that no interest had been taken. However, there is no record of any of these conversations. Mr T also says that Barclays should have been aware much earlier through its systems that the direct debits had been cancelled, and that the CRHs hadn’t been processed properly. In September, Barclays reinstated the direct debits so that the interest on all three loans could be paid, and it re-processed the CRHs, back-dating them to March 2020. However, this took some time as the removal of the arrears required internal approval. Once the CRHs were fully processed in January 2021, and letters issued to T confirming this, it then sought to address the information on T’s CRA file. Barclays took a few weeks to gain internal approval for it to apply to amend T’s CRA file, but it believes that by the end of March 2021 T’s record had been updated. Mr T doesn’t agree.

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He says that his relationship manager spoke of two files: one the bank could see and one he could see. Mr T doesn’t believe his CRA file was updated until May 2021. Mr T complained to Barclays on a few occasions. In its first response, in January 2021, Barclays acknowledged that its systems had failed to flag the arrears which had accrued on T’s three loan accounts, and that T had received no notification until September 2020. It apologised and offered T £200 in compensation. In a later response, in June 2021, Barclays acknowledged that it had also taken longer to correct T’s CRA file than ideal, and increased its offer of compensation to £300. In Barclays’ view, given that the poor credit information on T’s CRA file arising from the missed loan repayments was a result of Mr T cancelling T’s direct debits rather than a bank error, it was under no obligation to seek an amendment to T’s CRA file. However, as the bank acknowledged that it had failed to pick up the arrears as early as it might, it then worked pro-actively to make the change. Barclays said that it could not be held responsible for any consequences of the information on T’s CRA file. Background to part (b) The repayments on T’s three loans recommenced at the end of March 2021. However, T had insufficient funds in its current account to meet the repayments. Mr T says that he requested Barclays grant a further six-month extension to the CRHs on its loans, in which period he would have sought to obtain a CBIL. But this request was denied. Barclays says it understood from Mr T that T had agreed a large new facility with a bridging finance provider, for which Barclays had approved a deed of priority. Barclays says that it agreed that T could extend its overdraft beyond its limit to make the loan repayments, with the understanding that the overdraft would be brought back within its limits as soon as the bridging funds were available. However, Mr T has a different recollection. He says that he made clear to Barclays consistently that the bridging funds were needed to finance the working capital of the business. He says that his intention was always, once the credit file updated, to access alternative finance at lower rates (eg through a loan under the Recovery Loan Scheme). By May 2021, the overdraft had grown considerably, and Barclays was unwilling to provide a further extension. It also became aware that the bridging funds had been put into T’s business to fund working capital. Barclays therefore had significantly less confidence that the extended overdraft would be imminently repaid and, in June 2021, it recorded an unauthorised overdraft on T’s CRA file. Mr T says that, no sooner had Barclays fixed the problem with the incorrect records on T’s CRA file, it immediately declared T to be holding a large unauthorised overdraft. He says that T then had no chance to access a Recovery Loan or other longer-term finance, which immediately placed T in serious financial difficulties. T satisfied its loan repayments in June and July 2021 from funds held with a different bank but failed to make its loan repayments in August. At this point, due to the overdraft balance being significantly in excess of the agreed limit, Barclays ceased honouring any payments presented. However, Barclays believes that, by this point, T was undertaking much of its banking activity through a different bank, so it doesn’t believe the inoperability of T’s account with Barclays is likely to have had much impact on T.

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Mr T says that Barclays sabotaged his business by denying it the opportunity to seek alternative finance between its CRA file being updated and its large unauthorised overdraft being recorded. He says that, as he could not source alternative funds, not only did his loans with Barclays go into default but he was also unable to repay the two bridging loans T had taken out in 2020 when, due to T’s CRA record, no other finance was accessible. He says these bridging lenders are pursuing his personal assets to recover their debt, and T is incurring very high default interest rates and fees while this continues. Barclays says that it has continued to seek to engage Mr T in discussions to support his business and to work out a resolution. The involvement of our service In July 2021, not content with Barclays’ responses to his complaints, Mr T brought them to our service. Our investigator looked into things and gathered detailed evidence from both sides. With regard to part (a), she concluded that Barclays had been slow in identifying the arrears on T’s loan accounts but said that the £300 offered by Barclays was reasonable. She did not believe that Barclays could be held responsible for T’s adverse CRA file when the cause of the arrears was Mr T cancelling the direct debits on the loans; and, therefore, it could also not be held responsible for T being unable to access alternative loan finance. With regard to part (b), our investigator said that Barclays’ actions with regard to T’s overdraft were reasonable in the circumstances. She found that Barclays reviewed T’s financial position carefully in March 2021 when it declined to extend the CRHs, believing T to be profitable and to have imminent access to additional finance; but, given the growth in the overdraft facility between March and June 2021, it was reasonable for Barclays to limit its further use to fund the loan repayments and to record the overdraft as unauthorised. Our investigator said that, for this reason, Barclays could not be held responsible for any adverse effects on T from its unauthorised overdraft being reflected on its CRA file. Mr T disagreed with this view. Amongst other things, he said that:  It is not credible that Barclays were not aware of the cancellation of the direct debits in March 2020 or that Barclays’ systems wouldn’t have alerted it to T’s loan accounts being in arrears  Barclays failed to notify T of its loan accounts going into arrears, so it was unable to take any action to avoid the record on T’s CRA file  Given Barclays had approved the CRHs, it should have noticed that they hadn’t been processed  Mr T did notice that interest wasn’t being taken and discussed this with Barclays’ relationship manager, but he also thought it wouldn’t be unusual for interest to roll-up with the outstanding debt  In March 2021, Barclays might have looked at T’s profitability to determine that an extension to the CRHs wasn’t required, but it should have considered its free cashflow, which clearly wasn’t positive  As far as T is aware, its CRA file held no adverse information in March 2020 which would have prompted Barclays’ decision to reject its CBIL application, or to affect T’s later applications for finance In response to Mr T’s comments, we asked Barclays to provide more information about its decision to reject T’s CBIL application. Barclays explained that it considered the application according to its standard processes, including assessing the affordability of the loan, T’s

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previous track record and risk grading. Barclays said that, on the basis of the information available, the risk factors were such that it was unwilling to approve the requested loan. Mr T said that T’s inability to access a CBIL or Recovery Loan was entirely in consequence of Barclays’ actions, both in 2020 when Barclays failed to properly process the CRHs, and in 2021 when it refused to extend the CRHs in place and later recorded a large unauthorised overdraft. He said both actions had resulted in T being unable to access appropriate sources of finance, causing it first to require expensive bridging loans, and then to be unable to repay those loans. As the complaint could not be resolved, it was passed to me to decide. I issued a provisional decision in January 2023 and invited further responses from both T and Barclays. Barclays said that it did not object to the outcome proposed. Mr T provided a detailed response. I have reflected his comments and my views on them within this decision. However, overall, having considered his evidence very carefully, I have not changed the outcome of my decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. While I have read carefully the full correspondence between T and Barclays and considered all the evidence submitted, I have focussed my decision on the matters which I consider central to this complaint. Part (a) – March 2020 to March 2021 Barclays has acknowledged that (i) its systems failed to identify as quickly as they should that T’s three loan accounts were in arrears, indicating that the CRHs hadn’t been processed; and (ii) it took longer than ideal for T’s CRA file to be rectified. I think this is a fair summary of Barclays’ mistakes. I believe Mr T’s error was to cancel the direct debits, which were required for interest on the loan accounts to be paid. He did this before any CRHs had been agreed with Barclays. Unfortunately, I am unable to confirm when his request to cancel the direct debits was communicated to Barclays but, given there is no record on T’s account file with Barclays and that T’s relationship manager at Barclays agreed to process the CRHs (which was dependent on the direct debits being in place), I think it unlikely that the relationship manager or any others involved in dealing with T’s loan at Barclays were aware of Mr T’s action. Mr T believes that Barclays must have known that the direct debits had been cancelled and that, as one organisation, this information must have been available to his relationship manager. But I don’t believe that to be the case. Mr T manages the payments from his account and all Barclays did was process a mechanical change to his payments at his request. I see no reason why this should be flagged to T’s relationship manager. Given it was the cancellation of the direct debits which blocked the CRHs being properly applied, I believe Mr T is primarily responsible for the arrears manifesting on T’s loan accounts and therefore for the information which was recorded on T’s CRA file.

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Mr T has said that, at the point of cancelling the direct debits, he had no tenable alternative as the payments would have sent the accounts above their limit, which he believes would have resulted in Barclays rendering the accounts inoperable. Mr T believes that, in the context of the Covid-19 pandemic which had removed all T’s trading income, cancelling the direct debits was an entirely reasonable action to take to protect his business. However, in my view, given the CRHs only provided a holiday in capital repayments, Mr T should have been aware that interest payments would still be required. Therefore, even had he temporarily removed the direct debits, he should have restored them once the CRHs had been in principle agreed. As stated above, I do not believe it likely that Mr T made his relationship manager aware that he cancelled the direct debits as, had he done so, I believe the relationship manager would have anticipated the problem and required the direct debits to be restored before the CRHs were processed. Nevertheless, Barclays’ failure to identify the arrears for several months did cause the problem to persist. And its slow response to removing the information, also caused it to stay there for longer than should have been necessary. So I have considered the effects of these mistakes. Mr T says that he would have been able to access a CBIL or Recovery Loan on more favourable terms than the bridging finance into which he was forced. However, Barclays rejected T’s application for a CBIL in April 2020 prior to the adverse information relating to arrears on one of T’s loans with Barclays appearing on T’s CRA file. The letter supplied to Mr T at the time, in May 2020, explained that Barclays had concerns about T’s ability to make the necessary repayments. Mr T believes that Barclays rejected T’s application for a CBIL with little scrutiny. He says that, up until the government restrictions in March 2020, T’s borrowing with Barclays was in good standing. Therefore, I asked Barclays for more detail about its decision. This information demonstrated that Barclays had substantial concerns about T’s ability to service the additional debt sought by T given its existing borrowing. And although this decision was made in April 2020, the information on which it was based largely pre-dated the effects of the Covid-19 pandemic. I haven’t seen anything to indicate that Barclays assessed the application with insufficient scrutiny or bias. Mr T has said that, alongside applying to Barclays, T also applied for a CBIL to two other banks with which it had an existing relationship. He says that both of these banks would have reviewed the same information as Barclays, and both offered T a CBIL. T accepted a CBIL from one of these banks shortly after the rejection of its application from Barclays. However, while the CRA information from the banks would have been similar at this time, the information available to Barclays, as T’s principal bank, would have been substantially more. Barclays would have had a much richer view of the affordability of the CBIL to T and decided, on the basis of all the information available to it, not to lend. Mr T has said that, by the time further restrictions were introduced, at the point when T would have sought additional funding, new and extended CBILs were available. It is this possible lending (or a Recovery Loan) which Mr T believes T was prevented from accessing due to Barclays’ mistakes. However, it appears to me that, by this time, T had even greater levels of debt through its CBIL with another bank than it had in April 2020 when Barclays rejected its CBIL application. This additional borrowing would have made T’s ability to service a further loan even more

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difficult. I am unable to access information from the two other banks with which T had a relationship but, on the basis of it having been rejected already by Barclays and since then having taken out additional borrowing with one of those other banks, I do not believe it likely that T would have been able to access further funds as readily as Mr T has suggested. In my view, while I cannot be sure how another lender would have considered the information available, I do not believe that T would have accessed at this time a further CBIL or Recovery Loan from another lender even were the mistaken information relating to its Barclays loan not on its CRA file. Therefore, while I acknowledge that this is a judgement with which Mr T is likely to disagree, I am not persuaded that, on the balance of probabilities, Barclays’ mistakes caused T any loss. For these reasons, I do not believe it would be fair to require Barclays to compensate T for any increased borrowing costs it incurred in taking out bridging loans compared with a CBIL, Recovery Loan or other lower-rate facility. However, I do believe that Barclays mistakes caused T substantial inconvenience. Barclays has already offered £300 in compensation, but I believe this to be insufficient. Had the problems with T’s CRA file been identified earlier, and had it been rectified quicker, Mr T could have applied more quickly for other finance. He might have ended up with an expensive bridging loan but he would have gained clarity on this financial situation sooner – and saved considerable time and effort. I believe a payment of £1,000 is more appropriate (ie £700 more than previously offered). Mr T also suffered substantial distress caused by T’s CRA file displaying the incorrect information for longer than necessary. However, the complainant in this case is T, which, as a company, cannot feel distress. Therefore, I am unable to make any award to Mr T for the distress he suffered. Part (b) – March 2021 onwards Barclays agreed with Mr T to grant CRHs over T’s three loans for 12 months. It was under no obligation to extend the CRHs beyond this period. I’ve looked at Barclays’ assessment of T’s financial position in March 2021, and it appears to me that Barclays’ decision not to extend the CRHs further was reasonable. This assessment included an understanding that T had accessed bridging funds which would be used to bring down T’s overdraft. Mr T says Barclays should never have had this expectation as he had made it clear these funds were required for working capital in the business, but there are no records of these calls. Overall, on the basis of the evidence available to Barclays, I think it reasonable that Barclays chose not to extend the CRHs. Instead, Barclays offered T to use its overdraft temporarily to make the loan repayments. However, three months later, it became apparent that the bridging funds were not going to be used as Barclays expected, the overdraft had increased substantially and there was no prospect of it being repaid. Therefore, at this point, I think Barclays acted reasonably in recording an unauthorised overdraft. For these reasons, with regard to part (b) and Barclays’ actions from March 2021 onwards, I think Barclays acted reasonably and I do not require it to take any further action.

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I appreciate that Mr T will be disappointed with this decision. However, while I have great sympathy for Mr T and the situation he now faces, I do not believe I can reasonably require Barclays to do any more than I have set out. My final decision I uphold this complaint in part and require Barclays Bank UK PLC to pay T £1,000. Under the rules of the Financial Ombudsman Service, I’m required to ask T to accept or reject my decision before 22 March 2023. Andy Wright Ombudsman

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