Do you have money worries and a loan or credit card with your bank?

Former_MSE_Wendy
Former_MSE_Wendy Posts: 929
I've been Money Tipped! Newshound! PPI Party Pooper Best Buy Bear
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edited 14 June 2010 at 4:30PM in Debt-free wannabe


This thread is to specifically discuss the Setting Off guide


Many bank accounts have a little known 'Setting Off' clause, which means they can transfer cash, without permission, to pay off other debts held with it. Anecdotally, banks are invoking this more, especially for people in trouble; leaving victims without any cash.

If you're at risk, the only way to stop this outrageous practice is to move your bank account or debts to another bank.

Further reading: Radio 4 MoneyBox Story, Listen to the story

Please report your story below if you have been affected by this

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Comments

  • Lloyds TSB did this to me with no warning and they had never done it before even though I had previously once defaulted on my credit card approx 12 months ago so this was totally unexpected and made me default on paying my homeowner loan. how can they get away with this? i incurred charges from my Lloyds bank account then for them returning the direct debit from my homeowner loan but it was their fault that it went over my overdraft yet i was penalised further for them doing this.
  • I was a victim of this setting off just last week, I'm on benefits and they had been paid in on the Tuesday and the bank took £142 of my £150 which included child benefit and child tax credit, when i contacted the bank they where totally uncaring, if ordinary people did things like this it would be against the law, on a previous occasion I'd made a payment and they still took money from me, it's disgusting, to think that this can happen legally
  • Newbie06
    Newbie06 Posts: 215 Forumite
    This happened to me last week as well.. I then tried to open a bank account with coop, but when talking to them on the telephone it has gone to "referrred" status and they said they would let me know if my application was succesfull - so far have heard nothing.... I have lots of missed payments so my credit file isn't looking too good..

    What would be a good bank/b.society to apply to to avoid this happening again next month? does anyone know?
  • joy47
    joy47 Posts: 2 Newbie
    I took out a mortgage on my property for a loan for my partner on condition he made the repayments. We had to have a joint bank account at the same bank for the payments to come out of. I had nothing to do with this account until my partner stopped paying the mortgage. I then discovered he had taken out a credit card in his name only on the account and was in debt. The bank knew the situation amd knew I had no knowledge of the card debt. I have been paying the mortgage for the last 18 months but last month when I went in to pay my mortgage they took the payment and then told me that the money had gone towards the card debt. I had been worried that they might do this and had made sure that I went into the bank and specifically asked for the money to be paid into the mortgage acount and not paid into the joint account. The bank then said I had to pay off the card debt before they would accept payments off the mortgage. In order to prevent my property being repossesed I have had to borrow the money from my family to pay off this credit card. Did they have the right to do this?
  • fermi
    fermi Posts: 40,546
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    edited 7 April 2009 at 8:01AM
    Newbie06 wrote: »
    What would be a good bank/b.society to apply to to avoid this happening again next month? does anyone know?

    Any that are not with your current bank.

    If your credit record is not good then go for a basic account.

    http://www.moneymadeclear.fsa.gov.uk/HTML/en/products/bank_accounts/basic_bank_accounts_popup.htm
    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
  • I work for a bank in Scotland and remember studying the "Right of Set Off" law years ago when I did my Chartered Institute of Bankers in Scotland (CIOBS) exams. I seem to recall that this only applied when both accounts were in EXACTLY the SAME NAME and TERMS i.e. you couldn't set off funds in a savings account against funds in a current account. But you could if it was 2 current accounts that paid/charged the same rate of interest. Perhaps this is an outdated law and maybe the rules differ in England? In my experience, we never implemented the right to set off anyway. I would challenge the Bank for an explanation or evidence of their documented right to do this.
  • lynn1962
    lynn1962 Posts: 1 Newbie
    edited 7 April 2009 at 8:07AM
    I experienced this at the end of July last year. I looked at my bank account and there was a debit of over £1000 to Barclaycard. I rang the bank and said it has to be fraud because I have'nt had a card for two years. They said 'ah but do you owe them money?'. I was horrified because my rent was due 2 days letter! I have never defaulted on the arranged Consumer Credit Counselling Services payments to Barclaycard. They took it anyway! I did get £850.00 back two weeks later after going to the Banking ombudsman. However, had to go overdrawn for this period and Fax my Tennancy agreement along with other personal details. They did advise that it would not have been taken if they could have seen that the rent payment was due. Now I make sure I have all future payments set up and no cash whatsover in excess of these monies due left in the bank accout.
  • fermi
    fermi Posts: 40,546
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    edited 7 April 2009 at 8:14AM
    monkeypig wrote: »
    I seem to recall that this only applied when both accounts were in EXACTLY the SAME NAME and TERMS i.e. you couldn't set off funds in a savings account against funds in a current account. But you could if it was 2 current accounts that paid/charged the same rate of interest.

    Err... no. Well not any more anyway.

    The Financial Ombudsman explains a bit about when they feel it is fair to apply the "right of set-off" here:

    banking: firms' right of 'set off'

    Certain conditions must be met before the firm can exercise its right of ‘set off’.
    • The account from which the firm transfers funds must be held by the customer who owes the firm money.
    • The account from which the firm transfers the money – and the account from which the money would otherwise have come – must both be held with the same firm.
    • The account from which the firm transfers funds – and the account from which the money would otherwise have come – must both be held in the same capacity by the customer concerned. So, for example, if Mrs C holds a savings account in her capacity as treasurer of a local society, the firm cannot take money from that account to pay Mrs C’s personal credit card bill that she normally pays from the current account she holds in a personal capacity.
    • The debt must be due and payable. For example, if a customer misses making a loan payment, then (at least until it calls in the loan) the firm can take only the missed payment – not the balance of the loan.

    But at is says later, these rights can be modified by agreement, so it is best to check your T&Cs.
    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
  • my sister has a gold account with lloyds tsb. she lost her job so enquired about dropping the direct debit for life insurance that cam with this account. the bank agreed to this but only a few months later she recieved a letter saying that she was overdrawn by £180 due to bank charges. she has been paying off this debt for a long time now but the bank keep wanting to add charges. how can she finish this completely and how can i prevent this from happening to me?
  • I have contacted HSBC to let them know I cannot meet my full loan repayment this month. Aware of this problem I have opened an account elsewhere, for my priority payments. HSBC responded by taking the money out of my account with them, and putting me into overdraft (charging a temp overdraft fee), even though I did not previously have an overdraft with them. Can they continue doing this every month that I fail to meet my payments? It seems logical to me that if you owe them money, and you appear to have it in your account, they can take it. But it doesn't make sense to me, that they will take money out of your account, putting you into an overdraft, that has not been mutually approved.

    Is there anything I can do?
This discussion has been closed.
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