Do Banks have the right....

alan160168

I know this will be a silly question and I think I already know the answer, but my brother has asked me to find out anyway... He has 2 current accounts with Lloyds Tsb, one of which is permanantly overdrawn by between £1200 and £1600. The other account is the one which he uses for his wages and other direct debits.
He is now complaining bitterly because the bank has transferred £600 from his main account to the overdrawn account without any notification. This now means he is £600 down and his other account is now at his overdraft limit of £1000.
My argument is that as soon as someone goes overdrawn you are no longer using your own money but are in effect borrowing from the bank, and they can demand the money back at any time.
Is this right or am I being cynical.

RayWolfe

Yes they do have the right to demand repayment of an OD at any time. I would guess he has been abusing his relationship with the bank for them to have taken the step that they have.

Lavendyr

No, you're absolutely right. If he doesn't want Lloyds to do this, he should open a current account with another bank, but they can still demand repayment of overdrafts at any time.

You're not just borrowing "in effect" from the bank, you ARE borrowing from the bank.

Hope you can help your brother sort out his finances

Paul_Herring

If you look at the T&C's of any account, you will usually find a clause in there stating that they can, without notice, use one of your accounts to rectify any debit on another account you hold with that institution.

Sillychuckie

Can they take money out of your ISA's in the same way - meaning you could never replace it?

Just thinking of my barclays acct, where I have an interest free overdraft (so use it...), but also have an ISA in the black...
I'd be damn annoyed if they did that.

RayWolfe

I would guess, from your many postings Sillychuckie, that you would not abuse your banking relationships so the question would not arise.

CLAPTON

If he received no notice of their action I think he is entitled to complain that he was given no opportunity to pay the OD off. However, if he can't pay it off then complaining may not do him much practical good.

jonesMUFCforever

CLAPTON wrote: »

If he received no notice of their action I think he is entitled to complain that he was given no opportunity to pay the OD off. However, if he can't pay it off then complaining may not do him much practical good.

I think if the 'permanent' overdraft was an agreed overdraft I would agree if OP was within his limit.
If not giving notice would be giving OP time to withdraw the funds completely!

YorkshireBoy

ejones999 wrote: »

If not giving notice would be giving OP time to withdraw the funds completely!

Which they realise is possible, so they have it covered in condition 30.3

http://www.lloydstsb.com/media/lloydstsb2004/pdfs/cra.pdf

Interestingly, they now (from Nov 2nd 2007) also say they will take money out of your LTSB account to settle debts with other LTSB group companies and branded accounts such as those you may have with Chelenham & Gloucester.

Sillychuckie

Well, my understanding of the terms is that unless they have reason to believe I'll do a runner, they are required to notify me if they want the overdraft repaid (which I would always be able to do).
Considering I have regular payments in and out (each month, the balance is at some stage brought back above 0 thanks to salary etc - although, it is in the red for ~ 95% of the time), they would be rather harsh taking money from elsewhere to suddenly settle it (especially an ISA/Regular Saver). I think there would be grounds there for a complaint.

I'll continue to use it. Afterall, I assume that is what it is for.
The overdrafts are all agreed, so I'd hope the 'repayable on demand' would involve receiving some form of demand.

Sillychuckie

RayWolfe wrote: »

I would guess, from your many postings Sillychuckie, that you would not abuse your banking relationships so the question would not arise.

They provide a service.. and I make use of it.
I don't see how my post count has anything to do with the matter, or how you think I am 'abusing' my relationship.
I see this as being no different to someone 'abusing' 0% deals on credit cards, or balance transfers...

They offer me a 0% deal in return for my custom (and they hope, my loyalty long into the future). Clearly it works for them, since I have savings products with them as a result... and, its better that I'm with them than with their competitor.
The term 'abuse' doesn't apply here. If they want their OD back, they can provide me with notice, and they shall have it. Those are the terms that have been agreed.
If they don't provide notice, they will have to explain to the ombudsman how doing so would have "prejudiced their interests/regulatory position"... whatever that means (see ts+cs).