Why do banks allow unauthorised overdrafts anyway?

mailmannz

ILW wrote: »

I believe that in the USA, writting a cheque without the funds to cover it is a criminal offence that can end up in a prison sentence.

Only if it was your clear intention to defraud using the cheque, which the bank HAS to prove.

Mailman

david39

"the retailers server then dials up the banks server and hence after all the authentication is passed gets direct access to your bank balance to see how much you have in, "

"either the bank is purposely allowing the sale to go thorugh knowing very well that it will result in a bank charge or the retailer is allowing the sale to go through basically so that they get a sale out of it."


Quoted from 111222's post above.

Are you sure of this, 111222?
I don't have any inside knowledge on this but surely the retailer is not allowed to look at your bank account balance - data protection act.

Why would the retailer not allow the transaction to go through if the bank authorised it? - and at what point does the retailer say Yes or No?

I would have thought that it is the bank, and the bank only, that has the say on whether they approve the sale - they, and not the retailer, are the ones at risk of not recovering the transaction price. If the retailer is using On-line Authorisation (which virtually all do) then their money is guaranteed.

Fly_Baby

ganonman wrote: »

Why is it not the job of the bank as well as the account holder?

Technologically, they are capable of not giving money to people when they don't want to.

They make substantial profit from giving money to people that they shouldn't be giving money to.

Actually, that's what Barclays did to my account when I opted out of their Reserve service. I no longer can go over my overdraft - the bank will not authorise the transaction in store and will not allow me to withdraw funds from the ATM. I quite like this restriction - it means that I will not incur charges.

Now I suspect it WILL charge me if my DD happens to go over the overdraft limit and the DD will bounce. But all DDs and SOs are debited in the beginning of the month so the account will be very unlikely to be overdrawn, let alone over its overdraft limit, just after the salary has been paid.

natweststaffmember

ILW wrote: »

I believe that in the USA, writting a cheque without the funds to cover it is a criminal offence that can end up in a prison sentence. I think your usual bank customer tends to be a little more careful because of it.

I think you need to give me the law on that one because I have checked the Bank Of America terms and conditions for Alabama(not for all 52 states or I would have been doing that all day today ) and it isn't a criminal offence to write a "bad check" as I think they would call it.

willo65

djm1972 wrote: »

As it stands these days; this should never be an issue. Your insurance company will request the renewal payment before expiry; and if your account does not have sufficient funds the payment should be refused and your insurance company will contact you for an alternative means of payment.

If you pay in monthly installments?

willo65

djm1972 wrote: »

that is absolutely no reason for them to let an account go overdrawn beyond any agreed limit when they have absolutely no reason to except perhaps for the opportunity to charge exuberant fees.

Or as it will state in T&C's you have a right to make an informal request for an o/d ie making payments without funds and if the bank agrees you are not too much of a risk may agree to your informal request at a cost which will be £x depending on the bank.

So if the account holder doesn't make a request then no problems.

Natweststaffmember thanks for your response as always a valid point and something that could be a viable way forward for uk banks.

fuzzybear01

dlk wrote: »

That's absolute nonesense! The payment would hae declined unless you had funds available within your advised/unadvised limit. The payment would more than likey have been authorised when funds were available. Then other payments left your account bu once the authorisation is given the bank CANNOT go back on its original decision to pay the retailer.

It's not nonsense:mad:, they let a fraudulent paypal transaction through when I had no available funds (my account had been empty for a couple of weeks). I have no overdraft facility and was declined one when I asked for one to cover the amount until paypal sorted the mess out. HSBC stated that they also take into account whether you will be having money paid in e.g. wages or in my case student bursary.

joncow75

Fuzzybear, I had exactly the same situation with HSBC, allowing money to come out through a fraudulent paypal transaction. I had paypal prove it was fraud, but HSBC still didn't refund the charges. 3x£20 = £60 down! After they bounced the 3 DD's they then cancelled every other one in my account and didn't let me know for a week. I was dumbstruck! It finally made me leave and go to LloydsTSB who have been excellent in comparison.

martybassman

Are Debit card transactions, not technically guaranteed for the retailer? might dig out the t's and c's for my Visa card

crispy_chris

On Visas I know that the retailer can force the transaction through even if it gets declined. Most of the time the customer won't realise and pay the debit balance of their account and the corresponding charge and will just have a little moan to themselves.

Not to say this happens regularly, but it can happen.