Do you have money worries and a loan or credit ca...

[MSE Wendy]

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

PS. Martin & the site are looking to campaign on this issue, and we need your help. If you are be willing to be a case study in the media please email us with details so we can get hold of you if needed. As well as posting below of course.

[tricia27]

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.

[daallen]

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]

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]

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]

Originally Posted by Newbie06

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...unts_popup.htm

[monkeypig]

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]

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]

Originally Posted by monkeypig

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.

[Lauren-s]

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?

[Honolula13]

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?

[emlou2009]

hsbc did it to me last month but i managed to get the money back after a hour and a half shouting and repeating myself to the same person on the end of the phone! i kept asking things like "so when i go into labour and i cant afford to pay for my hospital taxi what do i do? when i need to buy nappies and formula what do i do?" they couldnt answer me so they put it back. i've moved accounts now so they wont be doing it again. i'm on a dmp with the cccs and they did it the day they had a reduced payment offer through. they knew my situation (heavily pregnant with no maternity pay except MA which wasnt coming through for another 3-4 weeks) as i'd also written to them explaining my situation repeating the cccs offer and they got my letter before the cccs's.

[RAS]

One of the worst case here is a couple who did not close a joint account before hubbie stated an IVA. The bank are using the off-set rule to draw the full payments for his sole loan from the jopint bank account (effectively taking it outside the IVA) for which she is now fully liable.

[bodiddley]

I am with Lloyds tsb and they have taken money out on numerous Occasions since August 2008, i had a reduced payment scheme with them on my credit cards but as soon as i was put redundant they stopped the scheme and started dipping in without first consulting me
Yours Thankfully
bodiddley

[King Drax I]

I used to have a Lloyds TSB credit card, and I bank with them too. When, a couple of years ago, they published some new Terms & Conditions, I actually read them for once. When I saw in the small print their 'setting-off' ability, I immediately cancelled that card. Not that I currently have any current debt problems, thankfully, but that I should potentially be penalised for loyally banking and having credit cards with the same bank was abhorrent to me. Like the rest of you guys, I reserve the right to control where my money goes, and what priorities I will allocate my debt payments to.

There are two points I'd like to make here.

Firstly, I feel that everyone who has been hit by their bank in this way should name and shame them here.

Secondly, the practice of setting-off is actually eroding the reasons why banks do 'free' banking in the first place. They're hoping that customers who have banked satisfactorily with them for years would turn to them first when they want a loan. Now, however, this practice of setting-off [why isn't it called 'stealing'?] will stop these people from borrowing from them.

I think that this is one of the most important principles ever to come from Martin's Money Saving site. Never, ever, borrow from the bank that your current account is with.

[tiff]

They can call in overdrafts at any time too, another reason to have your money paid into another bank if you cant repay your overdraft quickly.

[lisa110rry]

Now you have me a little worried. I've just changed to Lloyds TSB "Duo" for my credit card, I have been offered what I consider to be quite a high credit limit (over £4k), I have no balance transfer and when this month's payment has been made on my previous card, I will ask for it to be cancelled. (The reason for change is a little odd - my bank sent me a new debit card which was visually exactly identical to my credit card and my eyesight is poor, I didn't want to accidentally use my c/c to withdraw cash at an ATM.)

My question is: I have a joint account with my husband at Lloyds TSB, where we also have loans, which are being paid regularly and our current account is in credit. Would Lloyds TSB be able to "offset backwards" if we were to hit difficulties with our joint current account or loans and take what could hypothetically be an unlimited amount of credit from my credit card to offset against any default or overdraft? (My c/c has a direct debit from an account at a different bank in my name to pay the full amount each month.)

I'd be grateful for comments, for safety I may have to change my c/c again!

[Kernow18]

I had my current account, business account and savings account all with HSBC. Wheneven my business account reached its overdrawn limit HSBC regularly transferred money into it from my other accounts and on one occasion they took the whole of my salary from my current account on the day that it was paid in -this meant that I had no money in that current account and therefore it was subject to bank charges! I have won back those charges but the charges levied on my busiiness account meant that I had to cease trading and close the business in 1997.

[hillbilly5]

Hi

We entered a dmp with cccs just over a year ago - all running well. We have debts with several banks and so opted for an account with Lloyds TSB to have wages etc paid in.

We do have debts with Halifax though and with their merger I have been trying to find out whether Lloyds could offset our debts against what we owe Halifax.

I had been told that because they have seperate licences from FSA and are keeping their own identities this isn't a possibility, but I must admit that I am worried that one day we will find our LloydsTSB account cleared out.

Can anyone clarify this - as I phoned FSA the other day and they confirmed that they have seperate licenses but wonder, in view of Martins comments, does this also apply to debts or only savings?? Help.

[Holes in my pocket]

I have ben wondering the same I have a debt with llyods and have a halifax account though will close account soon as i am going bankrupt and just openned a CO OP account to proceed to next step