The "Right of Set Off"

[yourbank]

I was looking for something completely different for someone here and stumbled across this piece from the Financial Services Ombudsman News.

banking: firms' right of 'set off'

[bigmamma1]

Has anyone had their bank take money from a savings account under the banks 'right to set off' - to pay off credit card debt. I want to take some action against RBS to recover the money. I was holding it in trust for someone else and the bank has taken it pay off my debt. Is there anything I can do? Any help or advice will be greatly appreciated.

[gizmo111]

Was the money in your name?

[andydd]

Originally Posted by gizmo111

Was the money in your name?

This was featured in Watchdog a few weeks back, one major point to emerge from it is DO NOT have your credit card and bank account with the same company as they can legally dip into your bank account to recover any money owing on your credit card.

[bigmamma1]

gizmo111. Yes the money was in an account in my name only.


andydd. I now realise that you should never hold credit card account with the bank you have a current account or savings with. It may be too late for my situation though I think. Any advise ? I need to act quickly

[Bill Shidding]

Hi, I have a case pending regarding a current account overdraft and a successful reclaim for PPI. Apparently, the Bank is not entitled to "set off" against sums owed to me under the reclaimed PPI. This didn't stop them trying to "Force" me into accepting the repayment to set off the current account balance. Unfortunately for them, their own solicitors confirmed that there is no connection between the current account and the reclaimed PPI.
I have now told them I want my PPI refund paid directly to me, as their representatives correspondence infers, but they have gone quiet again ( but I haven't).
I assume that the Bank only has the right to set off, when the set off is from a "clean source". ie current/savings account.

Bill

[yourbank]

Originally Posted by Bill Shidding

Hi, I have a case pending regarding a current account overdraft and a successful reclaim for PPI. Apparently, the Bank is not entitled to "set off" against sums owed to me under the reclaimed PPI. This didn't stop them trying to "Force" me into accepting the repayment to set off the current account balance. Unfortunately for them, their own solicitors confirmed that there is no connection between the current account and the reclaimed PPI.
I have now told them I want my PPI refund paid directly to me, as their representatives correspondence infers, but they have gone quiet again ( but I haven't).
I assume that the Bank only has the right to set off, when the set off is from a "clean source". ie current/savings account.

Bill

Not sure about the forcing bit. Was the case taken to court? Or is this through the fos?

[Bill Shidding]

Hi Yourbank,
I used the word "force" because Nastywest would only refund the PPI against the outstanding balance of the current account. The regulatory risk department in association with the Kendal court operation had linked the two separate sums, and were not interested in any other payment destination/method.
Until they claimed the current account balance (in full) through the courts, this was deadlocked.
I pointed out (in my defence) that with my counterclaims for charges and the PPI, plus interest, they owed me more than I owed them. Their solicitors then said that the PPI was not linked in any way to the current account, and I should take it up with the bank. So, the bank thought they were entitled to set off, in total contrast to their own legal representatives' statement.
I have now written to the regulatory risk department with a copy of their solicitors letter. They are deafeningly silent. It doesn't bother me though, because it adds more gravity to my defence/counterclaims and unjust enrichment to boot. The Judge has stayed the claim 3 times already, because the claimant can't get their story/act together.
It is apparent to me, that the bank has been economical with the truth regarding their "right to set off". Despite the fact that I told them of my "first right of appropriation" 8 months ago. This was to inform them I needed the refund to keep my mortgage.

Bill

[yourbank]

FROA on what? wages?
We are confusing two issues. Have the bank refunded the PPI already and then offset it on a court claim? Apologies but I am confused. Will take a look tomorrow again with a slightly less frazzled brain(non alchoholic reason).

[Bill Shidding]

FROA on the PPI refund, which was a direct reclaim from me.
Bank accepted the PPI was mis-sold.
Bank stated the refund would only be credited to the closed current account.
Bank would not refund directly to me by cheque, as I requested.
I did not sign the F&F offer, because of this "term"
This "term" has been nullified because of the Banks' legal representatives' statement that there is "no connection between the current account and the PPI refund".
What the sols are saying is "You cannot use this PPI refund as a counterclaim against the current account claim, because the sums are not linked"
What the Bank is saying is "You cannot have the PPI refund, unless it repays the current account because the sums are linked"

Bill

[yourbank]

How have the bank responded to the FROA?

[Bill Shidding]

hi, the way they normally do!
By ignoring it.

Bill

[charley2212]

hi sorry to intrude, can some one help ref this set off , if for instance you have a current account and a credit card with the same bank and your accounts in overdraft to the max and your card s almost the same ok still with me , you have put a claim in for your charges that far exceed your debt and also reclaiming your ppi from your card ehich amounts to almost two thirds of the debt now obviously they are going to set off as soon as either is settled, so in order to control this assuming you have a parachute account, can you not freeze your current account so nothings allowed in or out by any one(not sure if the banks can or cannot )and therefore you receive a cheque and then you control who gets paid first and subject to any default removal you do pay them .
it would give you more control and is a tool to help your cause.
is control or information control all they strive for,
(so freeze your account , cheques get issued and you control the payment )i most prob am wrong on this perhaps some one could answer this cheers

[summerbreeze]

My bank has cancelled my Business overdraft [ in my name only ]because the turnover is minimal . The business has failed .It isnt a ltd. co.

My house is mortgaged [ joint a/c ] with the same bank and its an all in one type of account with a cheque book so all our SOs and DDs go out of that account. This account is in credit [ just] and mortgage up to date.

I am worried that as OHs salary goes into this account ... can they grab that money when it comes in and apply it to the business OD ? That is the only money we have to live on and to help support 2 kids at Uni .

Although I had been warned that my OD wouldnt be renewed I havnt had any letter to say that it was withdrawn and I was just under the OD limit but my OD limit now shows as zero online and I have a large negative balance.

I do have a parachute ac but definitely dont want to get behind with the mortgage and its very hard to work out the mortgage payment as its made up of a dual thing where the combined a/c limit is reduced each month to cover capital repayment and then there is a debit of interest each month also.

Any advice gratefully received.

[ravesafe]

i was 200 hundred pounds over my overdraft limit a couple of years ago. i had 250 pounds in a savings account for a holiday and i explained (by phone) the fact that i would be paying the money back in when i returend from holiday. everything seemed fine until the night before i was meant too leave when i tried to take my holiday cash out.

turns out that my the person i spoke to on the phone didnt have the authority to do anything to stop my money being removed.

it is an absolute disgrace. i have been stranded 400 hundred miles away from home before because the bank have taken money out of my account.

it should be illegal!

[yourbank]

Originally Posted by ravesafe

i was 200 hundred pounds over my overdraft limit a couple of years ago. i had 250 pounds in a savings account for a holiday and i explained (by phone) the fact that i would be paying the money back in when i returend from holiday. everything seemed fine until the night before i was meant too leave when i tried to take my holiday cash out.

turns out that my the person i spoke to on the phone didnt have the authority to do anything to stop my money being removed.

it is an absolute disgrace. i have been stranded 400 hundred miles away from home before because the bank have taken money out of my account.

it should be illegal!

Part of the article states this: "We would not usually expect a firm to warn customers before it exercises its right of ‘set off’. A warning might prompt customers to move their money to an account with a different firm. But we think that it is usually good practice for a firm to tell a customer as soon as possible after it has made a transfer."

However it also says

"We would not generally expect a firm to use ‘set off’ before giving the customer a reasonable opportunity to pay the debt. However, what is ‘reasonable’ might depend on the customer and the history of the account."

[Pipster2797]

what if someone was over their current account overdraft limit and they also had a loan with the same bank and they increased the overdraft limit on the current account to pay the balance of the loan off and then defaulted and terminated both the loan and the overdraft?

[FightToTheEnd]

would this also apply within banking groups? eg you had an o/d with LTSB but in credit at the Halifax?

[indebtstudent]

I wouldn't have thought so but I'd err on the side of caution and keep them seperate.

[BeauBrummie]

Hi I was looking into this question a couple of weeks ago for my own account with First Direct -- O/D and Loan---- I found the original T&C's with this in s 5.2

Set Off

If any accounts you hold with us or HSBC bank are in credit, we may use them to repay or reduce any amounts you owe us including but not limited to sums due on any other accounts you hold with us in the same name including any card accounts and any joint accounts with us or HSBC bank if we decide to do this, we will tell you why and when it was done.


So they have you by the short & curlies if they give you notice (and they clearly should) then you have by virtue of opening an account agreed to let them them "set off" in this way. As it happens in my case it is irrelevant but I can see that there are certainly instances where this may happen. So if a bank does this without notice (after checking the principle T&C's) you have strong grounds for a complaint and possible compensation.

Beau