Posted on September 6th, 2010 | Categories - News
Banks have been criticised for taking cash out of customer current accounts to pay off overdrawn credit card accounts without their permission.
The practice, known as ‘setting off’, is completely legal and allows banks to transfer cash between accounts that belong to the same person in order to repay their debts as long as they inform them of the changes afterwards. This can help customers by reducing interest charges on unarranged overdrafts or arrears on a loan or mortgage.
However, it can also prove a serious problem for people who are left without enough money in their current accounts to meet their living costs.
Statistics from the Citizen’s Advice Bureau show an 80 per cent rise in the number of inquiries regarding the practice, which now affects up to two per cent of customers. Sue Edwards, who works for the organisation, said that ‘setting off’ is “actually leaving people in dire poverty” and is asking banks to leave at least £1000 in people’s accounts to allow them to survive. She said: “It wouldn’t help everybody but it would help more people than at present”.
Eric Leenders from the British Bankers Association said: “The onus is on the banks to make sure they treat individuals sympathetically and positively. Banks should make sure there’s sufficient left for reasonable living expenses”.
The Financial Services Authority is currently setting up a new set of rules to provide banks with guidance regarding the procedure.