Banks dip into current accounts to settle credit card bills

by Gill Montia

Story link: Banks dip into current accounts to settle credit card bills

Banks have been accused of taking money from customers’ current accounts to pay off credit card debts or loans, without obtaining permission.

Cases of such transfers have been brought to light by BBC Radio 4’s Money Box programme and are confirmed by the Citizens Advice Bureau (CAB).

The charity claims to have seen a 25% rise in such incidents in the past two years and is calling on banks to scrap the practice.

In some cases the CAB says clients have had benefit payments transferred from their accounts, leaving them unable to meet mortgage and council tax bills.

Banks are legally entitled to transfer cash in this way under the “Right of Set Off”, although lenders normally take legal action to recover a debt.

The CAB is advising those affected to open a basic account with a provider that has not supplied them with any credit.

Benefits and other income paid into the new account cannot then be diverted in this way.

In December, UK credit card providers signed up to a set of principles that should help customers who fall into arrears with repayments.

Customers in financial difficulties now have 60 rather than 30 days’ grace and lenders have agreed not to raise rates if borrowers can show they are working to solve repayments problems.

In addition, the practice of hiking rates when a customer fails to make a minimum repayment for more than two months has been disbanded.