Zopa Bank Limited · DRN-6134343

The complaint Mr O complains that Zopa Bank Limited (“Zopa”) registered a default on his loan account later than it should have. What happened I won’t repeat all the facts here, as those aren’t in dispute. I have reviewed the entire file and if I don’t comment on something, it isn’t because I haven’t seen it - it’s that I haven’t deemed it relevant. I mean no discourtesy by this, it’s merely to reflect the informal nature of our service. Zopa provided Mr O with a personal loan for £5,300 in January 2022, which required 48 contractual monthly payments of around £182. From 21 April 2022 until 20 June 2022, Mr O was granted “Breathing Space” under the government’s Breathing Space Scheme, otherwise known as the Debt Respite Scheme. Around the same time, in April 2022, Mr O entered into a Debt Management Plan (“DMP”) via a debt advice provider (“DAP”). Mr O appears to have made the contractual repayments due under the loan agreement, until May 2022 at which point, he started making reduced repayments in line with his DMP. Mr O says despite arrears building from when he started to make reduced repayments, and despite Zopa’s own website stating it defaults loan accounts after four missed payments, it didn’t record a default until June 2023. He says Zopa also claim his DMP started in November 2022, but this is incorrect. Mr O thinks the default should have been registered no later than September/October 2022 and he would like the default date corrected and compensation for what’s happened. Zopa didn’t uphold Mr O’s complaint. It said following the Breathing Space, Mr O telephoned it on 12 August 2022 to explain he was receiving debt advice. In October 2022, Zopa received the DMP from Mr O’s DAP and Zopa says it accepted the proposed reduced repayment plan on 14 November 2022. Zopa says, due to the level of arrears on the account, Zopa defaulted it on 1 June 2023. Zopa said it hadn’t made an error when it defaulted the account. Our Investigator didn’t uphold the complaint, as they didn’t think Zopa had made an error when registering the default when it did. But Mr O didn’t agree. In response and in summary he said: • His DMP was active from 1 May 2022. His financial difficulty was long-term and irreversible from this point. He says he never resumed contractual repayments, and his financial position didn’t recover. • He accepts Zopa couldn’t take action during the Breathing Space period. But this isn’t justification for Zopa waiting for around a year to default the account.

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• Industry guidance allows flexibility where engagement may reasonably lead to recovery. But here, that isn’t what happened and the account defaulted anyway. • Zopa materially departed from its own guidance of defaulting after four months, without good reason. A lender can depart from guidance where it benefits the customer. • This service has previously ruled in his favour on a materially similar complaint. • The default should be backdated to around September/October 2022. Because the parties couldn’t agree, the matter has been passed to me to decide. 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. Having done so, whilst I appreciate this will disappoint Mr O, I’m not upholding his complaint – and I’ll explain why. Whilst Zopa’s website says it will default loan accounts after four months; this doesn’t mean I will hold Zopa to this. The relevant, Information Commissioner’s Office (“ICO”) guidance: “Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agencies”, says that generally, it expects accounts to be defaulted after around three to six months of arrears. So, irrespective of what Zopa says on its website, I must take into consideration wider, relevant industry guidance. But even that guidance must also be considered in context of other relevant guidance – which I’ll explain later. I can see the parties are now in agreement that Zopa wasn’t able to take enforcement action, including registering a default, during the period Mr O had been granted Breathing Space. For the avoidance of doubt, I agree with this. Breathing Space ended on 20 June 2022. Having seen copies of the correspondence Zopa received from Mr O, it seems it didn’t receive contact from Mr O’s DAP until October 2022, where it wrote to Zopa to propose a repayment figure of £42.01. That isn’t to say I doubt what Mr O has said about his DMP – I’ve seen clear evidence he entered into it in April 2022 and started paying from May 2022. But it seems Zopa didn’t know about it until October 2022. I’m further persuaded that Zopa didn’t receive confirmation about Mr O’s DMP earlier, as during this time, Zopa has said it received a call from Mr O, in August 2022, to explain that he was seeking advice from his DAP. Following this, Zopa appears to have applied a 30-day hold on the account in September 2022. It wouldn’t have likely taken these actions if a repayment plan was already in place. Considering what happened during the period May to October 2022, as our Investigator has pointed out, lenders are obliged to show forbearance where someone is experiencing financial difficulty, as was the case here. Given this, the fact Mr O had engaged with Zopa, letting it know that he was seeking advice and that he’d been consistently making reduced repayments towards the account (as opposed to not engaging or making no payments at all), I don’t find it unreasonable that Zopa didn’t default the account at this point. On the contrary, it’s actions to place a hold on the account seem reasonable to me. By October 2022, Zopa had received a letter from Mr O’s DAP, proposing a payment of £42.01. It seems Zopa agreed this and a repayment plan was set up for Mr O.

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So, by this point, Mr O had effectively entered into an arrangement to pay with Zopa. Generally, according to ICO guidance, a default wouldn’t normally be registered unless the terms of an arrangement are broken. For this reason, I don’t agree with Mr O that Zopa ought to have defaulted his account around September/October 2022. From the information Zopa had received from Mr O’s DAP, this is effectively when the arrangement started. So, it wouldn’t be fair or reasonable – or in line with relevant guidance, to default the account at the same time. Arrangements are, however, intended to be short-term. If they are going to be longer than say, for a few months, then I’d expect the lender to review the suitability of the arrangement regularly – around every three to six months. Here, of course, Mr O was receiving advice from a DAP, which appeared to be reviewing Mr O’s situation on a regular basis. After writing to Zopa in October 2022, the DAP wrote again in May 2023, setting out the proposed payment of £42.80. So, it will have been clear to Zopa at this point, that the repayment plan wasn’t temporary and was likely to be ongoing. Whilst ICO guidance says that a default wouldn’t normally be registered while an arrangement is in place, it doesn’t prohibit it. Therefore, I don’t find it unreasonable, given it would likely have been clear that the arrangement was no longer temporary at this point, and given that arrears had built up, that Zopa made the decision to send a default notice and subsequently default the account around this time. For the avoidance of doubt, I’m satisfied that even if Zopa had set up the DMP sooner – and as early as May 2022, I don’t think this would mean that Zopa should have registered the default sooner. I say this, primarily, because of the ICO guidance I’ve referred to above, that says a default wouldn’t normally be registered whilst there’s an arrangement to pay in place. However, in this scenario, it would mean that by the time Zopa defaulted the account, Mr O would have been in an arrangement to pay for around a year, as he’s pointed out. But, in the circumstances of this case, I don’t think this changes things. The period May to October/November 2022 would have been the first cycle of six months in an arrangement to pay, during which time, Breathing Space had also been applied. The arrears were also not as significant at that stage, compared to when Zopa did go onto default the account. So, even if Zopa should have set up the arrangement to pay earlier, in line with what Mr O has said, I still wouldn’t be persuaded that it has defaulted the account at an unreasonable time. I appreciate Mr O says he’s had a similar complaint with this service, which has been upheld. Each case is decided on its own merits, and I am not bound by the opinion of an Investigator or by the decision of another Ombudsman. In all the circumstances of this case, I don’t find that Zopa made an error and therefore I’m not upholding this complaint. My final decision My final decision is that I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr O to accept or reject my decision before 27 April 2026. Sophie Kyprianou Ombudsman

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