MSE News: FSA crackdown on banks raiding savings to pay debts

in Savings & Investments
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This is the discussion thread for the following MSE News Story:

"Banks and building societies will face curbs on dipping into your savings to clear debts, under proposals from industry regulator, the Financial Services Authority (FSA) ..."
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  • michaelsmichaels Forumite
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    IN theory I am unhappy with the idea that someone could borrow (unsecured loan) 10k from a bank and then park the same money in a savings account at the bank and tell the bank to 'go whistle' when it asks for repayment on the borrowed funds.

    In practice however the bank seems to put itself in a position above all other creditors by being able to have first claim on a persons assets regardless of what security has been arranged - for example if I owed two banks the same amount of money why should bank x where I have no savings stashed not be able to get anything back but bank y which has my savings be able to raid the savings pot?

    I think the separation of customer and banks money should go further with customer shaving to make payment to the bank for any charges owing just as every other creditor has to manage. For example a mobile phone company can not help itself to funds from a bank account for late payment of a bill , consumers can allow this with a direct debit but always have the option to cancel. I bet if banks were forced to bill consumers for their charges the discriminatory pricing structure seen would never have materialised.
    I think....
  • Paul_HerringPaul_Herring Forumite
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    The proposals aim to ensure banks and building societies:

    * Estimate what the FSA calls a "subsistence balance" to cover basic living costs, and leave at least that amount available to spend when setting off.
    That'll end up being what customers (will rightly) consider unreasonable thus not changing anything.
    * Inform consumers of their right to set-off "within a reasonable period" before doing so.
    And I bet 'informing' customers by sticking it in the small print of the T&C's upon account opening, or in something that looks like advertising in with a statement for current customers long before they actually use these clauses will be construed as a "reasonable time period," again, not changing anything.

    Do the people dreaming up these schemes have any concept of the real world?
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  • datostardatostar Forumite
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    Even in the case of deceased customers, they give themselves the right to remove funds to pay debts outstanding elsewhere in the organisation. Amazing. Even HMRC have to ask for payment of IHT. They can't just take it.
  • DarkConvictDarkConvict Forumite
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    I understand what micheals is saying in the first part, however this is rarly the case that people take £10,000 and drop it into savings (or have significant savings). It is spent on whatever they wanted it for to begin with.

    The 2 main issues are the fact that the bank does not have to goto court like everyone else to get a claim on the money. The bank is more than welcome to show proof of income/finances/savings if they have that available but to take it straight away is not fair.

    Examples from the debt free forum,

    #1, Current account has £800 wages paid in, bank takes the full £800 for a CC debt. Now what happens is direct debits come in for other credit cards, household bills, rent, mortgage etc. These fail to be paid, incur more charges, credit file is damaged, now in rent/mortgage arrears. Rent and mortgage are high priority debts and much be paid before unsecured debts, the bank has no knowledge of who the money is intended for.

    #2, Current account, bank takes money and pushes the person into the overdraft, overdraft incurs charges and goes into unauthorised overdraft making it much worse.

    #3, Poor example, Friend A deposits money in another friend (B) bank account, Friend B has a debt and the bank takes the friend A money. What the hell is Friend A going to do now? This can cause serious issues. Reason for poor example was that this was real on the DFW forum however the issue being that friend A was using the account to have 2 online poker accounts. Nonetheless all his winnings were taken by the bank to clear the debts of Friend B.

    #4, Benefits are paid into the account, the money is taken by the bank for other debts. Benefits are protected! The bank nor any other creditor aside from the government is allowed to touch it. People in dire need for the little money they get have to wait to see if the bank will refund it, and it can be a long process.

    #5, Martin has provided a list of related banks, and there are others out their. But in reaility not many people know who is who, and where money is safe from off setting.

    It should be simple, banks can see, but they cannot touch!
    Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.

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  • Paul_HerringPaul_Herring Forumite
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    #4, Benefits are paid into the account, the money is taken by the bank for other debts. Benefits are protected! The bank nor any other creditor aside from the government is allowed to touch it.

    That one's not as black and white as you think it is: http://webarchive.nationalarchives.gov.uk/+/http://www.number10.gov.uk/Page16882
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  • DarkConvictDarkConvict Forumite
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    Interesting read, it relates precisely to overdraft charges on the account the benefit is paid into. So it relates to the account the money is paid into and how it works, not the matter of off-setting another debt.

    I actually agree with the government response, if you have an account with -£200, and you get £300 benefits the balance will be £100.
    Yes, you have technically paid the bank £200 to clear the overdraft but it is the nature of number. You have a single running balance, rather than a positive and overdraft debt balance. If the current account was setup so you had £300 running balance and a £200 overdraft debt as separate I could agree you can't move money from one to the other, however it is just not a very logical way, its like anything you buy that goes over the limit would be put on a separate account like a credit card and the balance of the current account could never drop below £0. Ideally you do not want to have to be in the OD to begin with.

    Obviously the report you highlighted (good find) was those in worse situations that are stuck on the overdraft/unauthorised overdraft charges region.
    Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.

    There are two ways of constructing a software design: One way is to make it so simple that there are obviously no deficiencies, and the other way is to make it so complicated that there are no obvious deficiencies
  • edited 6 July 2010 at 10:03PM
    BigCraigJohnBigCraigJohn Forumite
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    edited 6 July 2010 at 10:03PM
    Oops just noticed this was the savings board, will leave my question anyway. :o

    Whats the situation in regards ot setting off and ppi rebates etc?
    For example Ive got a defaulted credit card for £150 arrears and £2700 balance.

    They have admitted mis selling £5700 of ppi on old closed loans.
    Can they and will they will use the refund against the credit card balance?

    I dont mind but was just hoping to stretch the refund a bit further by making f&f's.

    Ive completed the acceptance form asking for it to go into an unrelated account but its all come at the same time.
  • DarkConvictDarkConvict Forumite
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    Ask for refund by cheque, and put it in a bank you have no debts with, barlcays and co-op are usually seperate.

    List of banks - http://forums.moneysavingexpert.com/showthread.php?t=2044049&highlight=institution
    Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.

    There are two ways of constructing a software design: One way is to make it so simple that there are obviously no deficiencies, and the other way is to make it so complicated that there are no obvious deficiencies
  • If you owe money to one bank and have money in savings with another bank but the bank you have savings with is owned by the bank you owe money to can the owed bank remove funds from the bank they own where you have savings ?
  • Paul_HerringPaul_Herring Forumite
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    If you owe money to one bank and have money in savings with another bank but the bank you have savings with is owned by the bank you owe money to can the owed bank remove funds from the bank they own where you have savings ?

    Depends on the T&C's I suspect, and how close the banks are.

    If the two banks concerned were, say, Halifax and LLTSB, I'd say unlikely but not impossible.

    On the other hand if they were Abbey and A&L, both now Santander, I'd say it would be more likely.
    Conjugating the verb 'to be":
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