Santander UK Plc · DRN-5677013

The complaint A limited company, which I’ll refer to as ‘P’, is unhappy that Santander UK Plc has defaulted its Bounce Back Loan (“BBL”) P’s complaint is brought to this service by its director, whom I’ll refer to as ‘Mr M’. What happened P took out a £50,000 BBL with Santander. In 2023, due to financial difficulty linked to his health, Mr M contacted Santander and arranged for a six-month interest-only Pay As You Grow (“PAYG”) payment holiday to be applied to P’s loan beginning in September 2023. Santander wrote to P on 22 September 2023 confirming the revised repayment terms and explaining that additional interest of £279.84 would be applied because P was using the PAYG interest-only option, as the capital balance of the loan wasn’t decreasing as initially scheduled during that payment holiday. P continued to experience difficulties, and Mr M discussed further repayment support with Santander in early 2024. Santander sent a letter to P on 7 March 2024 advising that the first payment-holiday period was ending. On 15 May 2024, following discussions with P, Santander sent confirmation of a further six-month interest-only PAYG arrangement and again explained that additional interest would have to be applied. Santander’s notes also indicate that Mr M was informed of the additional interest during the telephone call in which the PAYG option was discussed. During the remainder of 2024, P fell into arrears. On 4 September 2024 Santander discussed the arrears with Mr M, which totalled £1,203 at that time. As these could not be cleared, Mr M was advised to contact Santander if P’s circumstances improved. The arrears increased to £1,284.21 by 7 October 2024, at which point Mr M expressed an interest in taking a third PAYG interest-only period once the second one ended on 27 October 2024. Further discussions took place in November 2024. On 1 November, Santander explained the terms of the interest-only PAYG option to Mr M, including the additional interest. Mr M said that he wanted to consider what he’d been told. On 11 November, Mr M said he wanted to proceed but could not complete the declaration due to his ill health. On 20 November, Mr M said he was unhappy about the additional interest that would be applied to P’s BBL if P accepted the terms of the interest-only PAYG option and raised a complaint, saying that he didn’t feel this point had been clearly explained previously. On 9 December 2024, Mr M again enquired about using an interest-only PAYG option but declined to proceed after Santander explained that the additional interest would still apply. By early 2025, the arrears on P’s BBL had continued to accrue. Santander issued a notice of termination on 4 January 2025 explaining the arrears of £1,909.64 and warning that the loan would be demanded in full if payment was not made within 14 days. As the arrears remained outstanding, Santander issued a formal demand on 10 February 2025 and moved to default the loan.

-- 1 of 4 --

A second complaint was raised on 10 March 2025, during which Mr M explained that he had travelled abroad for medical treatment and later noticed that payments for P’s BBL had not been collected. Records show that Mr M contacted Santander from overseas on 10 March 2025. During that call Mr M was advised that the loan had already defaulted because the arrears remained outstanding. Mr M also asked Santander’s agent to call him back on the overseas number he was calling from, which the agent couldn’t do. Because of this, the agent said that repayment options for the defaulted balance could be discussed when Mr M returned to the UK. Mr M also said that he believed a direct debit had been in place. However, while Santander’s notes confirm that Mr M had previously discussed setting up a direct debit with them on 4 September 2024, their records show that no direct debit mandate was ever active on the account. The records do not indicate why the mandate was not successfully set up. P has since paid the defaulted account balance and asked that the default be reconsidered in light of Mr M’s health difficulties and what Mr M considers to be unclear communication around the additional interest. Santander responded to P’s complaints but didn’t feel it had done anything wrong either in the information it had given Mr M about the additional interest that interest-only PAYG options entailed, or by defaulting P’s loan. Mr M wasn’t satisfied with Santander’s responses, so he referred P’s complaints to this service. One of our investigators looked at this complaint. But they didn’t feel that Santander had acted unfairly as Mr M contended and didn’t uphold this complaint. Mr M remained dissatisfied, so the matter was escalated to an ombudsman for a final 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. I want to start by acknowledging the difficult circumstances Mr M was facing throughout the period of this complaint. It’s clear that he was seriously unwell and at points unable to stay on the phone or complete forms and later required treatment abroad. I appreciate that these health issues will have made it much harder for him to manage P’s financial affairs and to engage with Santander when repayment difficulties emerged. I have kept this firmly in mind when reaching my decision. For me to uphold a complaint, I need to be satisfied that the business acted unfairly or unreasonably in a way that caused the outcome the complainant is unhappy about. However, after reviewing all the available evidence, I don’t think that Santander acted unfairly in the way it handled P’s BBL or in applying a default when the arrears remained outstanding. The evidence shows that Santander spoke with Mr M on several occasions throughout 2024 about P’s payment difficulties. Each time, Santander explained that an interest-only Pay PAYG option could be applied to help reduce the immediate monthly payment, but that taking this option would result in additional interest being added to the loan balance because the capital wouldn’t be repaid during that period as scheduled meaning that interest on that unpaid capital would naturally accrue. That additional interest would be incurred in such circumstances seems reasonable to me. It’s also important to note that the PAYG options available for BBLs were designed by the UK Government and formed part of the rules set by the British Business Bank. Lenders had

-- 2 of 4 --

no discretion to alter those terms, including the requirement for additional interest to be applied during an interest-only period. This means that Santander couldn’t have offered an interest-only option without the additional interest, even if it had wanted to. So, when Mr M said he didn’t want the additional interest to be added, there was no alternative arrangement permitted by the BBL scheme that Santander could reasonably have offered him. On several occasions Mr M chose not to proceed with the PAYG option once the additional interest was explained to him. On other occasions he was too unwell to complete the required declaration. Because of this, once the second PAYG option had ended, P reverted to and remained on its standard contractual repayment terms. By the second half of 2024 arrears had begun to accumulate on P’s BBL, and these continued to increase over the following months. Santander wrote to P as the arrears built up, explaining the consequences of non-payment and what would happen if the arrears weren’t cleared. When the arrears remained unpaid, Santander issued a notice of termination on 4 January 2025, followed by a formal demand on 10 February 2025. When P didn’t satisfy the requirements of those notices, Santander defaulted the loan in line with the terms of the agreement. That doesn’t feel unfair to me, and I’m satisfied Santander acted in the way I would expect a lender to act where arrears persist and no alternative payment plan has been agreed. Mr M later said that while he was abroad for medical treatment he contacted Santander and agreed to pay the outstanding balance and the additional interest and understood that the matter would be discussed further when he returned to the UK. Santander’s call notes show that Mr M did speak to Santander from overseas on 10 March 2025. However, by the time of that call the BBL had already been defaulted. The agent explained this to Mr M and said that repayment options for the defaulted balance could be discussed further when he returned, but there is no evidence that Santander had agreed to rescind the default action that had already occurred, or that any earlier assurance of that kind had been given to Mr M. I’ve also considered the issue Mr M raised about the direct debit. The records show that although a direct debit was discussed and noted as being “reset” on 4 September 2024, there is no evidence that a mandate was ever successfully set up on the relevant account. The records do not explain why, but I’ve seen nothing to suggest Santander cancelled an existing mandate or failed to collect a payment where a mandate was in place. And, ultimately, as the director or P, it was Mr M’s responsibility to have monitored the payments and ensured they were made or made arrangements for that to be done if he was unable to himself. Taking all of this into account, I’m satisfied that the default was applied fairly because the contractually required payments weren’t made, and also that Santander acted in line with both the terms of the loan and the BBL scheme rules, including those surrounding PAYG options. While I’m sympathetic to the very difficult circumstances Mr M was facing at the time, I can’t fairly say that Santander was responsible for the arrears accruing or for the default being applied. And because I think the default accurately reflects what happened, I can’t reasonably ask Santander to remove it. It therefore follows that I won’t be upholding this complaint or instructing Santander to take any form of action. I hope Mr M will understand, given what I’ve explained, why I’ve made the final decision that I have. My final decision My final decision is that I do not uphold this complaint.

-- 3 of 4 --

Under the rules of the Financial Ombudsman Service, I’m required to ask P to accept or reject my decision before 26 March 2026. Paul Cooper Ombudsman

-- 4 of 4 --