Banks cancelling overdrafts

oompahloompah

This has me really concerned. I have a facility for a £300 overdraft on my personal account which I have never used, so that wouldn't bother me at all. However, the business account has a £10K overdraft which is regularly used for cashflow while we are awaiting payment from customers - are any of these accounts with the overdraft facility removed business accounts, or do you think these would be treated any differently? Our account is with the RBS.
Thanks

OrkneyStar

oompahloompah wrote: »

This has me really concerned. I have a facility for a £300 overdraft on my personal account which I have never used, so that wouldn't bother me at all. However, the business account has a £10K overdraft which is regularly used for cashflow while we are awaiting payment from customers - are any of these accounts with the overdraft facility removed business accounts, or do you think these would be treated any differently? Our account is with the RBS.
Thanks

The way you use your business acc with the £10K O/D is imho exactly how they should be used.
Could you contact them and ask for a review meeting ?
That way you could put across the importance of the O/D and also show you are using it properly (in other words not continually in the red).
Just a thought, and best of luck.

ShelfStacker_3

The problem is that "£200 o/d to just cover anything at the end of the month" is where the problems begin. Because you're spending more than you earn, so the next month when there's things at the end of the month that need covering, you're further into the limit again, and again, and again... it's a vicious cycle of spending more than you earn that has been well documented here and indeed (indirectly) on the main MSE site itself as part of the "debt spiral" thing.

ShelfStacker_3

oompahloompah wrote: »

This has me really concerned. I have a facility for a £300 overdraft on my personal account which I have never used, so that wouldn't bother me at all. However, the business account has a £10K overdraft which is regularly used for cashflow while we are awaiting payment from customers - are any of these accounts with the overdraft facility removed business accounts, or do you think these would be treated any differently? Our account is with the RBS.
Thanks

There are cases where banks have attempted to force business customers who have been up to their limits/never out of their overdrafts (i.e. using them as loans that are never repaid) to repay them through some means. There was a case about this on the FOS website, IIRC, which I'll dredge up in a minute.

However, from what I've seen it's rare. Far less common than with personal accounts, as business customers, as OrkneyStar says, tend to use overdrafts for their intended purpose - cash flow.

ShelfStacker_3

That case study I mentioned. I should probably mention that the FOS say these shouldn't be taken as precedent, so, your mileage may vary.

Mr and Mrs B ran their own small company from home, trading collectibles on the internet. They complained that the bank’s ‘inflexible attitude’ to lending was damaging their business.
They said the bank had been unnecessarily cautious, had failed to take all relevant information into account when making lending decisions, and had not understood ‘the nature and particular commercial challenges of e-commerce’. The couple added that the bank had forced them to convert their business overdraft into a business loan that they did not want – and had ‘starved the business of essential cash flow to maintain turnover and fund growth’.
When the bank rejected their complaint, Mr and Mrs B came to us.
complaint not upheld
We examined the bank’s records of its decisions about lending to Mr and Mrs B’s company. We also looked at the way the company had operated its current account, including the way in which it had managed its overdraft facility.
It was clear that the bank had become concerned about the company’s dependence on its overdraft facility. The company regularly exceeded its overdraft limit. And the overdraft had become a static debt rather than a facility to be dipped into when needed, to assist cash flow.
The bank had wanted the company to convert this overdraft debt into a loan, and then start to repay it. However, Mr and Mrs B had evidently felt very strongly that the bank should have been willing to negotiate on this point. They wanted the bank to arrive at a compromise which enabled them to keep an overdraft facility and did not require them to take a loan.
Discussion and negotiation between banks and their business customers is generally the right way to approach lending decisions. However, that does not mean a bank may never take a lending decision with which the business customer disagrees.
In this case, we could not see that the bank had been unfair or unreasonable in requiring the company to start repaying its overdraft facility. The loan that it offered meant that the debt could be repaid in monthly instalments, and at a lower rate of interest than before.
We did not accept Mr and Mrs B’s argument that the problem stemmed from the bank’s failure to understand the nature of their business. The evidence we saw did not persuade us that further discussion with the couple – or additional information about their business – would have altered the bank’s lending decisions in this case.
The underlying problem seemed to us to be the basic difference of approach between Mr and Mrs B and the bank. Mr and Mrs B had an ambitious business plan and were keen to be given the lending flexibility that would allow them to pursue it. The bank had a more cautious attitude.
We told the couple that the bank had not acted incorrectly and had been entitled to make its own commercial decision about the degree of risk it was prepared to take in lending to their company. We did not uphold the complaint.

kazf2007

Well to be honest I am in so much financial dire straits that if they took away my overdraft I couldn't possibly pay them the money back anyway. I think it gets to the stage when it gets so bad that you haven't a hope in hell of getting out of your situation. It all started when my partner left me and I had a lot of things to pay out for as he couldn't because he was really ill and self employed. If they took me to court it wouldn't make any difference because physically I just don't have the money. If baliffs turned up they wouldn't find anything of any value to take as I don't own anything decent, no car, crap non digital second hand tv, crap second hand sofa, and that's about it really. I am in f/t work but what I earn goes straight back out every month.

I guess people can say it's my fault but it doesn't alter anything or put food on the table so I'm not really fussed.

sluggy1967

ShelfStacker wrote: »

The problem is that "£200 o/d to just cover anything at the end of the month" is where the problems begin. Because you're spending more than you earn, so the next month when there's things at the end of the month that need covering, you're further into the limit again, and again, and again... it's a vicious cycle of spending more than you earn that has been well documented here and indeed (indirectly) on the main MSE site itself as part of the "debt spiral" thing.

Oh of course, silly consumers, tut tut, smack our hands! Must remember to tell the school the reason why our kids shoes are falling apart...we shouldnt be so damn frivilous with our spending! What do you think people are using their overdrafts for? Holidays in Orlando? I repeat - fuel bills have gone SKY HIGH, food bills have ROCKETED. Kids GROW OUT OF CLOTHES etc - INCOME FOR MANY PEOPLE HAS REMAINED THE SAME OR FALLEN (redundancy, shorter working week etc) I'm sure, working in a bank, you come across people who just dont budget or look after their money wisely, but DO NOT tar everyone with the same patronising brush.

Oh and whilst I'm on this rant, when this recession is over & it's all been forgotten about, please tell your fellow workers that when I pop in to pay a bill over the counter STOP TRYING TO FLOG ME PRODUCTS I DIDNT ASK FOR OR WANT - come on MSE readers, who recognises this little conversation? "Whilst you're here, can I interest you in our credit card?" "No thank you, I already have one" "May I ask who it's with and what the APR is, I'm sure ours will be better, it's 0% interest..." blah blah blah

emmasherrock

this is a reply to mabel with the 10.000 overdraft limit that never uses it! well arent you bloody lucky love!! you clearly have a secure job and no money worries so why are a member on this site?? some people do need to use an over draft now and then. do you have a mortgage?? its the same principle, your borrowing money from a bank. duh!!
sorry to bring you back down to earth with a bump but posting things like that is likley to get peoples backs up.

ahai1

What you are trying to say is that the customer is not at fault? Call me old fashioned but I thought it always took 2 to tango. Banks are not here for people to get free money but they are a place for lending, saving and safe keeping of money.

I am sorry but I think that some people here have got the idea that they have a god given right to an overdraft. The banks may have lent silly money but the person taking it is as much at fault as the banks. Unless you think the customer can do anything they like.

Justamum wrote: »

There's a big contradiction in here. The banks were the ones who lent the money to the customers - silly multiples of salaries for mortgages - because they were coining it at the time. Suddenly it's all come back to bite them on the derrier.



Agreed. The 'indians' don't get paid high salaries but the 'chiefs' get paid a small fortune, then get huge bonuses (whose money is that - the customers'), and a nice fat pension when they retire. They've been feathering their nests for far too long, get into trouble, and the taxpayer (those people who are struggling) have to bail them out, and STILL they get their bonuses and pensions!!!




Bully for you. Pat yourself on your sanctimonious back. There are plenty of us who can't save because we don't have enough of an income to do that.



Perhaps they should have thought about that before lending the money in the first place without proper checks (self-certification is hardly the way to go is it?) The people who borrowed the money didn't go in with masks on and guns in their hands demanding to be lent money. The banks could always have said 'no' or lent sensible amounts. Perhaps if they'd stuck to the 3.5 times salary for mortgages for instance, then we wouldn't be in the situation where it costs a quarter of a million pounds to buy a house the size of a garden shed.

Kavanne

emmasherrock wrote: »

this is a reply to mabel with the 10.000 overdraft limit that never uses it! well arent you bloody lucky love!! you clearly have a secure job and no money worries so why are a member on this site?? some people do need to use an over draft now and then. do you have a mortgage?? its the same principle, your borrowing money from a bank. duh!!
sorry to bring you back down to earth with a bump but posting things like that is likley to get peoples backs up.

Haha are you joking? I might be 'comfortable' too but I will still save as much money where I can!