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Increased use of set-off by banks

I am obliged to Sally Chicken to referring me to a blog entry by Martin Lewis of moneysavingexpert.com on banks right of set off. It seems that the banks have the power to transfer money from savings accounts (if they are held by the same organisation) to pay off money due to them by the account holder elsewhere, for example for credit cards or loans. The bank is unlikely to let you know that they are going to do this, to prevent you from moving the money, so it could hit you at any time (although banks are unlikely to do this save as a last resort). However sudden unexpected transfers can cause enormous trouble for the account holder.

It looks as if banks are now doing this more, the Citizens Advice Bureau apparently have seen a 25% increase in this happening.

Probably the answer is to make sure that you keep your savings entirely separately from your main accounts. Although as so many banks and building societies own each other nowadays this may be easier said than done. If you are not sure about this, consider using a Credit Union.

Mr Lewis also points out that if the transfer results in cheques or other payments not being met, this could result in your incurring bank charges (i.e. the bank who caused the problem might be profiting from it!). Which is very unfair. Maybe if this happens to you, a complaint could be made to the Office of Fair Trading?

You can read Martin Lewis? blog item in full here.

Full post as published by The Landlord Law Blog on April 08, 2009 (boomark / email).