Bank reducing overdraft using benefits

Badger_Lady · 5 October 2009 at 7:36PM

Hia,

Apologies if this issue has come up before... I want to make sure I'm getting advice for the exact situation (it's not me but a friend, well person who owes me rent!).

Here's an extract from her letter:

Here's the thing with the benefits. The other day, I recieved a letter from my bank saying they were going to make bank charges as I'd gone overdrawn, The only way I thought this could have happened was through housing benefit not paying. When I rung up the ESA (benefit) helpline, they told me that housing benefit would be suspended whenever ESA was waiting for a new sick note, so it seemed confirmed and I concentrated my efforts on getting my main benefit up and running again. The idiot at the bank assured me there seemed nothing wrong with my account, so I went to housing benefit. They told me it had been payed, and so I rang my bank again to find out why I had no money.

I had to wait until today to see the manager, who explained it had been paid, but the boffins at the bank failed to explain that my account is such that the overdraft decreases by £500 every 6 months, so they used the benefit to reduce my overdraft without telling me.

My ESA wont come through for another 3-4 weeks, so I have NO money to live on, and am reying on my BF entirely (bless him). He has agreed to lend me £300 to tide you over until housing benefit sent me another payment of £270 in about 2 weeks.

Now, my immediate thought was that the bank can't use benefit money to repay a debt (the overdraft)... am I wrong about that? Does she have the right to march back in there and demand her benefits back?
Basically, she owes me 2 months' rent (£600), which has been paid to her by the council but her overdraft was reduced between in arriving and her paying it to me.

Cheers in advance

dmg24 · 5 October 2009 at 7:39PM

Yep, unless she has requested the right of appropriation in advance, the bank are entitled to use the benefit payments towards her overdraft.

If it is the first time she has been overdrawn, she could request that the charges be returned. If not, she needs to open a separate account (such as the Post Office) for her benefits to go into

hippy-chicy · 5 October 2009 at 7:41PM

There is something called the first right of appropriation which prevents the banks from using benefit money to reduce overdrafts/ charges etc. However, i dont know if this can be applied retrospectively so it maybe the money that has already been paid in ( the HB ) has been lost.

Badger_Lady · 5 October 2009 at 7:42PM

Cheers, dudes. That's bad news for me, who won't be able to get my rent arrears back

(I'm pretty certain even a CCJ following small claims can't be paid by benefits, can it?)

dmg24 · 5 October 2009 at 7:42PM

hippy-chicy wrote: »

There is something called the first right of appropriation which prevents the banks from using benefit money to reduce overdrafts/ charges etc. However, i dont know if this can be applied retrospectively so it maybe the money that has already been paid in ( the HB ) has been lost.

It cannot be applied retrospectively.

munchings-n-crunchings · 5 October 2009 at 7:58PM

I have my HB paid directly to my landlord, just so it doesn't get caught up in my personal finances. I think it's now paid by BACS.
It would be far too easy for the money to get swallowed up.

Perhaps this is the route you need to go down with your tenant.
I know I specifically requested this, as it was an option, so I would assume your tenant would have to consent to the rent being paid direct, but under the circumstances, I think you have valid reasons to request this.
This would all need to be set up before the next payment run.

Regards
Munchie

Badger_Lady · 5 October 2009 at 8:10PM

Thanks Munchie - that is the next step actually... the council said that they will divert the payments to me if I can prove that she's 8 weeks or more behind (which she is). Proof can include getting her to agree.

So I am pushing forward with that option - was just hoping there might be a quicker resolution for the arrears! Council won't help with those

hippy-chicy · 5 October 2009 at 8:21PM

Paying direct to the landord depends which scheme she has been assessed under.

If she was claiming prior to April 08 (subject to a ROD) and has had no breaks and not changed address she can request that the HB is paid to you.

If she has been assessed under the Local Housing Allowance scheme she cant request that it is paid to you as it has to be paid to the tenant direct. ( unless certain criteria are met.)

However, being 8 weeks or more in arrears means that payments can be sent to the landlord, you dont need the tenant to confirm this, you need to write in to confirm the period the arrears are over and the amount of the arrear. EDIT : We would accept written proof from the landlord and this would be sufficient proof on its own - however, each LA is different so if they want her to confirm you will need to provide this.

However, remember that if you charge rent in advance HB will not take this into account as arrears.

Badger_Lady · 5 October 2009 at 8:23PM

hippy-chicy wrote: »

However, remember that if you charge rent in advance HB will not take this into account as arrears.

Ah, that's good - on that basis she's eight and a half weeks in arrears

I don't feel so silly for waiting this long now.

I did write in with the details, and they've suspended her payments for two weeks to give her a chance to dispute what I wrote. I assume that, if she confirms it, they won't have to wait the full two weeks...

Jowo_2 · 5 October 2009 at 10:31PM

Badger_Lady wrote: »

(I'm pretty certain even a CCJ following small claims can't be paid by benefits, can it?)

It's typically considered a waste of time, effort and expense to take somebody to court who you are unlikely to be able to enforce payment from if judgement is made in your favour .... because they have no income in which to pay it back. At most, they may be instructed or offer to pay it back by a small sum a month. If they take a job in the future, you can get an attachments of earnings with their employer.

However, establishing a CCJ against a tenant with rent arrears, even if the possibility of being repaid is low, at least means that a future landlord who runs a credit check will establish that they are unreliable and screen them out.

honeyD · 5 October 2009 at 10:49PM

Its interesting that this has been asked as I have a question myself if Badger Lady doesnt mind me throwing it out in her thread!
My Sister gets Carer's benefit paid into her bank account, its the only money she receives at the moment. She has gone over her balance a couple of times in the last few months, only by pence once and then a couple pound the next time. The bank then whacked on a load of charges, even though she wasnt aware she was in an overdraft as they sent the letters to her previous address!
Can they take carers benefit to repay this kind of overdraft? Since it wasnt an overdraft they gave her, if you know what I mean. Not sure how to word it lol.

Bank reducing overdraft using benefits

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