Discretionary Payments of Direct Debits

roey316

Hi All,

Not sure if this has already been answered in a previous thread. I had a quick look and couldn't find anything.

I have a 'trading as' business account with my bank. I don't have an agreed overdraft limit and there have been occasions in the past were unfortunately a cheque has come out of my account before cleared funds have been available to honour that cheque. As as result, the cheque bounces and I get a nice bank charge for my trouble. When I query this I am told that I don't have an agreed overdraft facility and therefore my cheque cant be honoured.

Recently, however, I have had a similar issue with direct debits in the same account. A direct debit has been taken from my account without the sufficient funds in place and has cleared, and a nice bank charge has been added for my trouble. The value of the direct debit and the subsequent charge result in me being overdrawn.

When I asked the bank for the reason why they had honoured a direct debit that took me into an unauthorised overdraft without my consent, they told me that they have the "discretion" to make payments on my behalf, as and when they see fit.

My question is simply this: Does the bank have the right to accrue charges and debt in my name without a prior, written agreement in place if they cite "discretion" as a reason for doing so?

Thanks in advance

P.

grumbler

The simple answer is YES. The bank has a right to stop any payments taking you over the agreed limit, but has no obligations to do this.
Would you prefer a charge for a bounced DD instead plus problems with the DD originator?

BTW, you are supposed not to issue any cheques that are not supported by the cleared funds in your account at the time of writing a cheque.

dr_adidas01

roey316 wrote: »

Hi All,

Not sure if this has already been answered in a previous thread. I had a quick look and couldn't find anything.

I have a 'trading as' business account with my bank. I don't have an agreed overdraft limit and there have been occasions in the past were unfortunately a cheque has come out of my account before cleared funds have been available to honour that cheque. As as result, the cheque bounces and I get a nice bank charge for my trouble. When I query this I am told that I don't have an agreed overdraft facility and therefore my cheque cant be honoured.

Recently, however, I have had a similar issue with direct debits in the same account. A direct debit has been taken from my account without the sufficient funds in place and has cleared, and a nice bank charge has been added for my trouble. The value of the direct debit and the subsequent charge result in me being overdrawn.

When I asked the bank for the reason why they had honoured a direct debit that took me into an unauthorised overdraft without my consent, they told me that they have the "discretion" to make payments on my behalf, as and when they see fit.

My question is simply this: Does the bank have the right to accrue charges and debt in my name without a prior, written agreement in place if they cite "discretion" as a reason for doing so?

Thanks in advance

P.

I think you need to re read the T&C's of your account again as all this will be in them, which you agreed to when you opened the account.

Even on standard current accounts banks can choose to decide to pay direct debits even if you have no overdraft or insufficient funds in your account, and then charge you an fee for doing so.

Somewhere in the T&Cs it usually says something like, we may at our discretion pay direct debits and other payments even if you have insufficient funds in your account, this may depending on your circumstances put you into an unthorised overdraft for which you will be charged a fee.

KaiserBill

My question is simply this: Does the bank have the right to accrue charges and debt in my name without a prior, written agreement in place

Thanks in advance

P.[/QUOTE]


Yes they do have such a right. It will have been in their terms and conditions - which you will have had to agree to in order to open an account with them.

roey316

Hi,

Thanks for your reply. With respect, the issue with the DD originator is a moot point, I can handle the originator without any problems.

Also, again as an aside, funds were available and present at the time the cheque was written, but were taken by the bank as a charge for the aforementioned overdraft issue, after the cheque was issued but before the funds were taken.

Going back to my original question, and to clarify:

The bank has no obligation to stop funds being taken from my account, even if that results in taking me overdrawn? Up to what sort of limit? If I had a direct debit for, say, £1000, and I had £30 in my account, you're saying they could release that payment?

The reason I am asking these questions is that from looking at these occurrences with this account and talking to other people about their issues, there seems to be a degree of inconsistency as to when this "rule" applies. When are they obliged and when aren't they? If I am being frank and honest, if I don't have the money in my account to pay for something, then it shouldn't be paid for. That is the agreement I was under the impression I signed for when I opened my bank account without at agreed overdraft?

roey316

dr_adidas01 wrote: »

I think you need to re read the T&C's of your account again as all this will be in them, which you agreed to when you opened the account.

Even on standard current accounts banks can choose to decide to pay direct debits even if you have no overdraft or insufficient funds in your account, and then charge you an fee for doing so.

Somewhere in the T&Cs it usually says something like, we may at our discretion pay direct debits and other payments even if you have insufficient funds in your account, this may depending on your circumstances put you into an unthorised overdraft for which you will be charged a fee.

Thanks for this, I'll have to take a look at my agreement and see what it says.

grumbler

roey316 wrote: »

...
The bank has no obligation to stop funds being taken from my account, even if that results in taking me overdrawn? Up to what sort of limit? If I had a direct debit for, say, £1000, and I had £30 in my account, you're saying they could release that payment?

Yes, it's up to them to decide. They lend you money after all.

The reason I am asking these questions is that from looking at these occurrences with this account and talking to other people about their issues, there seems to be a degree of inconsistency as to when this "rule" applies. When are they obliged and when aren't they? If I am being frank and honest, if I don't have the money in my account to pay for something, then it shouldn't be paid for.

Ultimately, they pay the money that you agreed to pay. If you are 'frank and honest' you should have not promised to pay this money to the recipient(s) in the first place.

That is the agreement I was under the impression I signed for when I opened my bank account without at agreed overdraft?

Without agreed overdraft just means that the agreed limit is £0.
If the agreed limit is, say, £1000, the bank decides whether to stop payments taking you over £1000, but has no obligations to stop you getting £1500 overdrawn.