Bank Setting Off Rules

glortard

Apologies if this has been posted elsewhere first. I have done some reading on the above issue and pretty sure the answer is no but just wanted to double check.

My business partner recently received his personal credit card statement from Halifax and on it was stated the setting off message if a payment was missed they could take it from other accounts even if it was joint.

We have a business account with Lloyd's registered in the name of out limited company but obviously our personal names are associated with it. He was concerned they could take money from this however I was not for a number of reasons

1 - due to the account being in the name of a limited company

2 - the fact that although Lloyd's now own Halifax they have not fully merged their systems to show holding across the group.

Thanks

InsideInsurance

Ultimately it all comes down to terms and conditions.

The company and him are two separate legal entities with their own monies, liabilities and possessions but it is possible for either legal entity to give a guarantee to the other (just as two natural persons can).

It would need to be much more explicitly stated in the terms & condition that they can off set across "your" accounts as the company account isnt his, its the company's account. They could have wordings that would allow it but I would be highly surprised unless it was individually negotiated

Naf

Setting off cannot be applied to business accounts, only personal ones.

JuicyJesus

Naf wrote: »

Setting off cannot be applied to business accounts, only personal ones.

Not true. If it's a sole trader business account in the customer's name only then the money can be set off against.

If it's a limited company the company is its own legal entity and set-off does not usually apply between its accounts and the personal accounts of its directors. I say usually as I've no doubt there are some situations where it can happen.

Miss_Havisham

the rule for right of set off used to be "same name same right", meaning the accounts had to be in the same name and the account holders had to give the bank the right to set off. The latter is probably covered in T & Cs nowadays but the "same name" should still apply.

opinions4u

glortard wrote: »

Apologies if this has been posted elsewhere first. I have done some reading on the above issue and pretty sure the answer is no but just wanted to double check.

My business partner recently received his personal credit card statement from Halifax and on it was stated the setting off message if a payment was missed they could take it from other accounts even if it was joint.

We have a business account with Lloyd's registered in the name of out limited company but obviously our personal names are associated with it. He was concerned they could take money from this however I was not for a number of reasons

1 - due to the account being in the name of a limited company

2 - the fact that although Lloyd's now own Halifax they have not fully merged their systems to show holding across the group.

Thanks

On point (1) your partner is completely right. A limited company is a different legal entity to those who own it.

On point (2) the T&Cs will probably allow for right of set off across the wider LBG group. But their internal policy is not to apply it across brands or banking licences.

Many of their systems are, however, merged.

More detail on right of set off in the link below.

https://fsahandbook.info/FSA/print/handbook/BCOBS/5

Buzby

Invariably, if they can they will. If a Ltd company's directors have provided personal guarantees, then they will take the funds without a second thought. I learned early on the best way to work is have your private accounts at a different bank from your business accounts. The problem then does not arise.

Naf

Buzby wrote: »

Invariably, if they can they will. If a Ltd company's directors have provided personal guarantees, then they will take the funds without a second thought. I learned early on the best way to work is have your private accounts at a different bank from your business accounts. The problem then does not arise.

Until Santander buys them both lol.

antrobus

Buzby wrote: »

Invariably, if they can they will. If a Ltd company's directors have provided personal guarantees, then they will take the funds without a second thought. I learned early on the best way to work is have your private accounts at a different bank from your business accounts. The problem then does not arise.

If a director has provided a personal guarantee to Bank A, the fact that the director concerned holds their private account at a Bank B will not prevent Bank A from collecting on the guarantee. It might slow the process down a bit, but that's all.

Now back to 'Bank Setting Off Rules'. The first thing to note is that everybody has the right of set-off, going back to the Insolvent Debtors Relief Act 1729; banks have no special privilege in this regard, it just so happens that people are more likely to come across it in relation to banking.

The FOS sets out the position here;
http://www.financial-ombudsman.org.uk/publications/ombudsman-news/40/40_setoff.htm

Generally speaking if somone owes a bank money, the bank concerned cannot 'set-off' that debt against either (a) a joint account or (b) a limited company account, to which that someone is a signatory.