Can the bank do this?

sscrabble

Not sure if this is the right thread but sure there will be gurus on here - My brother has a business - he has had an unsecured £50,000 overdraft for maybe 10 years - about a year ago he was told that the overdraft was no longer going to be permitted and he could not issue any cheques against uncleared effects ( if he paid in £1000 and wrote a cheque for £500 two days later the bank would bounce the cheque because the £1000 was still uncleared as it takes four days)
But then on one day they put in cheques for £40000 and issued cheques for about the same amount that were not supposed to be presented until the next week - but the person put them in the same day - and the bank paid them - the cheque they had paid in bounced and the person had problems with there own bank - and then that person went under so the cheque was worthless. So now they are £40000 overdrawn !
No way they can repay that money and keep the business turning over, so they have just reduced it bit by bit over the last year - now down to £30000 though it fluctuates. But suddenly the bank have said they want the full amount back and will not allow any overdraft against unsecured effects ( as a year ago) , or they are going to charge 29% interest against anything outstanding.
Can they do that - any other thoughts?

Leixlip1

I guess the bank will quote their terms & conditions...............

Jenna

Most overdrafts are re-payable on demand. You / your brother would need to check the T&C's as to whether they can charge 29% on it.

Hopefully the lesson has been learnt (albeit the hard way) re not taking cheques without a guarantee card or similar. Also never take someone's word for when they'll pay in a cheque, either don't issue it or date it for some time in the future.

Could he consider another form of finance for that £30k (at a lower interest rate than 29% obv!!!) and then gradually pay it back? Is this business profitable??

Also - last but not least! - is it a limited company? If it's not, he could potentially be personally liable for the debt, even if the business went under.

HTH xx