Nationwide Offseet Loan From Current Account - Now In OD!

[diddydicky]

the bank is NOT allowed under the banking code to create (or increase an existing) overdraft under the rights of set off and you should write and tell them this and demand that they reverse the transaction within 7 days failing which you will report the matter to the banking ombudsman

 

 

the banks can only use funds from another account that is in CREDIT under the set off rules

 

Personally i would also e mail tony hetherington at the sunday mail who i am sure will get involved and highlight this case in his column WITHOUT revealing your identity

Edited September 14, 2009 by diddydicky

[diddydicky]

Diddydick -could you point me please to where in the Banking Code it says an overdraft can't be increased like this?

 

Except for making a formal complaint can anyone suggest how to respond to their letter?

 

yes ill see if i can find it - i did post it a while ago i;ll look again

[diddydicky]

from the banking ombudsmans office

 

banking: firms' right of 'set off'

 

It is not unusual for a customer to have a current account, a savings account and a credit card account – all with the same bank or building society. The same customer might also have a loan, an ISA and a mortgage with that firm. And some of those accounts might be held jointly with someone else, usually a spouse or business partner.

 

In this article we look at what the firm can (or should) do where a customer does not have enough money in a particular account to make payments due from that account, but does have sufficient funds in one of their other accounts with the firm.

 

For example, when an overdraft facility on a current account runs out and the customer fails to pay the amount owed, can the firm take money from the customer’s savings account to reduce or clear the debt? Or, if a customer fails to make credit card or mortgage payments, should the firm use available funds from that customer’s current or savings account to make the missing payments, thereby helping the customer to avoid extra interest or charges?

 

The basic position is that a firm has a right – but not a duty – to look at a customer’s overall position and to ‘combine’ the accounts held by that customer. This is sometimes called a right of ‘set off’ or a right to ‘combine’ accounts. A firm has this as a general right, whether or not it mentions the right in the account terms. So, in the examples above, the firm can transfer money from an account that is in credit in order to make payments due on another account. But it does not have to do this.

 

Certain conditions must be met before the firm can exercise its right of ‘set off’.

 

 

The account from which the firm transfers funds must be held by the customer who owes the firm money.

 

The account from which the firm transfers the money – and the account from which the money would otherwise have come – must both be held with the same firm.

 

The account from which the firm transfers funds – and the account from which the money would otherwise have come – must both be held in the same capacity by the customer concerned. So, for example, if Mrs C holds a savings account in her capacity as treasurer of a local society, the firm cannot take money from that account to pay Mrs C’s personal credit card bill that she normally pays from the current account she holds in a personal capacity.

 

The debt must be due and payable. For example, if a customer misses making a loan payment, then (at least until it calls in the loan) the firm can take only the missed payment – not the balance of the loan.

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.

 

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.

 

The general position can be modified by agreement between the firm and its customer. This might include:

 

 

an agreement that ‘set off’ be available to a firm’s mortgage arm, where it is a separate legal entity;

 

an agreement to regularly ‘sweep’ any money over a certain balance out of a current account and into a savings account;

 

an agreement that money held by a customer in one capacity can be used to pay debts owed by the same customer in a different capacity.

 

The following case studies illustrate how this works in practice.

 

case studies: banking - firms' right of 'set off'

 

40/1

transfer from joint account to pay debt on sole loan account

 

Mr G, an elderly widower, needed help with his financial affairs. He decided to make his daughter, Mrs B, a joint account holder on his current account. In that way, she could pay bills for him. It would also be easier for her to tie up his affairs after he died.

 

Some time later, Mrs B took out a personal loan with the same firm. Her father was quite unaware that she had difficulties paying the monthly instalments, and that the firm eventually called in the loan. Because Mrs B was unable to repay the money, the firm transferred funds into her loan account from the joint account she held with her father.

 

When she discovered what had happened, Mrs B was extremely upset because it meant that she had to tell her father about her financial problems. This was not only an embarrassment for her – it became a serious worry for her father.

 

When she complained, the firm defended its actions, telling her that the terms and conditions of the joint account allowed it to transfer the funds from the joint account. Unhappy with this, Mrs B then brought her complaint to us.

 

complaint upheld

The edition of the terms and conditions that the firm referred to was the most recent version. It had been issued some years after Mr G had opened his current account – after Mrs B had become a joint account holder and after Mrs B had taken out the loan.

 

Mrs B did not recall seeing the leaflet containing the updated terms and conditions. However, she accepted that she might well have received a copy as part of a regular mailing from the firm – probably with her monthly statement.

 

We noted from the latest version of the terms and conditions that there was a term allowing the firm to take money from the joint account to pay debts owed solely by Mr G or by Mrs B, as well as to pay debts owed by them jointly. However, we thought that this was such a radical departure from the normal position that it was an ‘unusual’ term. It was also an ‘onerous’ term, because its effect was to make Mr G liable for Mrs B’s debts.

 

A firm can only rely on terms that are ‘unusual’ and ‘onerous’ if they have been brought fairly to the customer’s attention. The Banking Code says that customers must be given personal notice of any terms that are to their disadvantage. We did not think it enough for a firm simply to include the revised edition of the account terms when it sent out routine statements to its customers, which is what had happened here.

 

We also thought that the term was ‘unfair’ within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999. This was because it created a significant imbalance in the parties’ rights and obligations, to the detriment of customers. Specifically, it had the effect of making Mr G a guarantor of Mrs B’s debts – but without giving him the information that a guarantor should usually be given.

 

We told the firm to transfer the money back to the joint account – leaving it to find other ways of recovering the money that Mrs B still owed.

 

.............................................

 

40/2

transfer from savings account to daughter’s credit card account

 

Mrs J had a current account and a savings account with the firm, as well as a credit card account. She was also an 'additional cardholder' on the credit card that her daughter had with the same firm.

 

Mrs J decided to set up a standing order to pay £100 a month from her current account into her credit card account. Unfortunately, a mistake by the firm resulted in the money going instead to her daughter’s credit card account.

 

Then because no payments were being made into Mrs J’s credit card account, the firm decided to transfer money into that card account from her savings account. When the firm refused to uphold her complaint about this, Mrs J came to us.

 

complaint upheld in part

Mrs J had not paid the bill for her credit card. The card was issued by the firm and held by Mrs J in a personal capacity. She held a savings account with the firm, also in a personal capacity. So the firm could use money from Mrs J’s savings account to pay her card bills.

 

However, it was clear that if the firm had set up the standing order correctly in the first place, there would have been no arrears. And Mrs J was not liable for her daughter’s card bills, even though she was an additional cardholder. So we told the firm to reverse the entries and to make any necessary adjustments to the interest and charges that Mrs J had been asked to pay.

 

Mrs J’s daughter remained liable to pay her own credit card bill.

 

.............................................

 

40/3

transfer from sole savings account to pay arrears on joint mortgage

 

Mr D and Miss T had a joint mortgage with the firm. Mr D also had a savings account with the same firm. He was often a few weeks late in making his mortgage payments and, on a number of occasions, he had to pay fees for being in arrears.

 

A couple of weeks before the couple were due to go on holiday, Mr D visited his local branch of the firm. He intended to withdraw some money from his savings account in order to pay a few bills and get some spending money for his holiday.

 

However, he was very shocked to find that the balance on his savings account had been reduced almost to nothing. The firm had transferred most of his savings to pay the arrears on his and Miss T’s mortgage.

 

complaint rejected

The mortgage was held on a ‘joint and several’ basis. That meant that Mr D and Miss T were both liable to make payments on it – both individually and together. So, Mr D did owe the mortgage arrears to the firm.

 

Mr D held the savings account in a personal capacity. So the firm could transfer money from Mr D’s savings account to pay the arrears he owed on the mortgage. It did not matter that Miss T also owed those arrears, because that did not make any difference to Mr D’s liability for them. We therefore rejected the complaint.

[diddydicky]

Thank you very much for this Diddy.

 

Re-reading Nationwide's letter, they have been careful not to use the phrase "set-off", instead they use the phrase "eloan account being collapsed into your FlexAccount"

 

Obviously the effect is the same. I really haven't a clue where to go from here. The month reduction in the account they are demanding is just ludicrous.

 

Would anyone comment on this proposed course of action:-

 

1. Write and make formal complaint and ask for their Complaint Resolution Procedure. (But what do I actually say in the complaint letter? Do I mention that they have moved an agreement which was regulated under the CCA to one which isn't?)

 

2. See if they supply the loan agreement under the CCA request made recently.

 

3. If they don't supply the loan agreement, write again and put the account into dispute.

 

(This would still leave the account overdrawn and I assume [but have received nothing to tell me] that they have withdrawn the overdraft facility) - so would the dispute over the E-Loan throw the current account into dispute as well?

 

As ever, all help is welcomed.

 

it does not matter what they call it- it is off setting and if they have done so on an account that is not in credit they will be ordered to rectify the situation if a complaint is made

[diddydicky]

On the plus side

 

paying off your regulated agreement and putting the debt into an account in which you did not give written consent to create as an overdraft or loan puts you in an even stronger position, since they have no agreement upon which to force payment

 

personally i would write and complain that they have taken this action, point out that by doing so they have demonstrated that they no longer wish to be party to continuing the agreement with you and that they have unlawfully terminated the contract which, in view of the loss of faith- you have decided to accept- You therefore consider yourself releived from all obligations that existed under the now terminated agreement.

 

As far as the new borrowing is concerned- you neither wanted nor agreed to it therefore you suggest they write if off as you have no intention of repaying it and you will. counterclaim any proceedings brought in respect of the matter

[diddydicky]

On the plus side

 

paying off your regulated agreement and putting the debt into an account in which you did not give written consent to create as an overdraft or loan puts you in an even stronger position, since they have no agreement upon which to force payment

 

personally i would write and complain that they have taken this action, point out that by doing so they have demonstrated that they no longer wish to be party to continuing the agreement with you and that they have unlawfully terminated the contract which, in view of the loss of faith- you have decided to accept- You therefore consider yourself releived from all obligations that existed under the now terminated agreement.

 

As far as the new borrowing is concerned- you neither wanted nor agreed to it therefore you suggest they write if off as you have no intention of repaying it and you will counterclaim any proceedings brought in respect of the matter

[diddydicky]

I like your style Diddy, I don't think I'm quite that confident yet - I'd prefer to understand why they think that they can do this.

 

I need to get my hands on a copy of the E-Loan Agreement. I am virtually positive that I signed a seperate agreement for this.

 

Am I right in thinking that just by calling it a "Loan Account" and it being a seperate account number then it MUST be a regulated agreement?

 

thats fine- but you should understand that hat the withdrawal of your ability to make monthly repayments of your choosing (subject to a minimum amount) is the MAIN benefit to you of the agreement.

 

The creditor is not lawfully entitled to remove that benefit without first issuing an effective DN and lawful termination

 

there is therefore no doubt that if he failed to do the foregoing he has indeed terminated the agreement (unlawfully)

[diddydicky]

it would be the genuine arrears as at the time of termination, set against which would be your claim for damages for the unlawful termination

[diddydicky]

Another update guys - I've now had a reply from Nationwide stating that under the terms of the agreement if I break any of the terms of the agreement they may combine the e-Loan facility with any other Nationwide Account or Facility I may have.

 

However - they have not done this - they left a small balance in the loan account so both accounts still exist.

 

Am I right in thinking that in addition to being in breach of the banking code they are also in breach of the Consumer Protection from Unfair Trading Regulations 2008?

 

Any suggestions how to go from here would be much appreciated - I should also point out they haven't as yet said their reply is a "final response" so I don't think I'm quite at the Ombudsman stage yet.

 

Thanks again in advance

 

they may have left a small balance- try getting some dosh out of a cash machine and i think you'll find it is blocked

[diddydicky]

do both

[diddydicky]

i'm in a mellow mood- ill cast BOTH eyes over it

[diddydicky]

and the moral of the story is....................SAYG

[diddydicky]

Personally i would condens e it – but your call obviously

 

Dear Sirs

I refer to recent correspondence and have now had chance to review thoroughly previous correspondence. I also note you have now seen fit to refer this account to KPR despite it being in genuine and serious dispute. You are aware of my concerns as to NW’s conduct to date, these concerns and disappointments remain.

Having taken limited advice, I would comment on the eLoan as follows.

1. In September 2009 a request was made under s78 CCA 1974 regarding the eLoan. This was signed for on X and to date has not been responded to. You are therefore in default of your obligations under s78 of the consumer credit act and are prevented from enforcement until such time as you comply.

The eLoan is an account regulated under the Consumer Credit Act 1974. Which you have acknowledged

 

3.On XXXXXXX date you unlawfully terminated the agreement. And you were, at the time if that unlawful rescission entitled only to the amount of arrears outstanding.

 

Following termination of the agreement, and in contravention of the banking codes of practise you appear to have transferred the amount of the credit agreement onto my current flexaccount thereby causing an overdraft and or further loan that i had not agreed to

Despite the foregoing and notwithstanding that no valid agreement existed upon which to serve a Default Notice , you then serve a s187(1) default notice against a non existent account, and which therefore had no legal effect, Even were there an account in existence to which it could be lawfully served, the default notice would be invalid in any event.

 

I suggest that a meeting be arranged to discuss a resolution to this matter in an informal setting failing which i will be making a omplaint to the banking ombudsman and will defend and counterclaim any action you may bring against me- if necessary with CFA assistance.

 

Y F

[diddydicky]

I had assumed from your posts that the E loan was a fixed or running credit account seperate from your flexaccount

 

they unlawfully terminated this agreement so were only entitled to ther arrears

 

the right of "set off" by which a bank can group your debts onto one account would only apply to an account that is in credit- and then only if they had a lawful debt,

 

since they in effect made a gift of any sums not yet due when they unlawfully terminated your regulated agreement they cannot then "transfer" this non existent sum by taking it from your flexaccount

 

in effect they are trying to replace a regulated agreement with one that is not. so unless you signed a new credit agreement (regulated) for the money they took from your flaxaccount to pay off the e loan - then they cannot issue a default notice because there is no (valid) agreement in existence to issue it against

 

if they attempt to claim that this was then an unregulated agreement then they would have to explain what a licensed creditor is doing flogging unregulated loans

 

IF the agreement had been lawfully terminated AND you had sufficient funds in credit in your flexaccount they COULD have taken these to pay that debt- but NOT if it puts creates an overdraft (which is essentially a new loan)

 

the fact that your flexaccount was already overdrawn is of no consequence- you cannot be forced into a new loan without your agreement

 

as they say oop north- they are stuffed any road up chuck!

[diddydicky]

i understood you (wrongly it seems) said the DN was served against the E loan account.

 

any way, they unlawfully terminated the e loan and therefore the DN issued against the flexaccount- if issued under s187(1) would have contained an incorrect amount as arrears if it included missed payments on the loan that was unlawfully "transferred" to it) apart from any other issues with the DN (dates etc(

 

CFA- Conditional Fee Arrangements (no win - no fee lawyers)

 

was the e loan fixed term or a credit card account?

[diddydicky]

well against an overdraft that would be right i think- but NOT if the unlawfully rescinded account balance was included

 

yes, - i would leave out the reference to the DN being issue against a non existant account and concentrate on the unlawful rescission and the amount stated in the dn

 

were the dates ok for the DN? can u post it up as they sometimes omit prescribed text

[diddydicky]

you are confusing me now- probably your letter not being in chronological order

 

just re state

 

are you saying that they terminated, transferred the debit to your flexaccount and THEN issued a DN

 

or did they issue a DN against the flexaccount, terminate and then debit your flexaccount?

[diddydicky]

Having taken limited advice, I would comment as follows.

 

1. In September 2009 a request for a true copy of the executed agreement was made under s78 CCA 1974 regarding the eLoan. This was signed for on X and to date you have failed to comply You are therefore in default of your obligations under s78 of the consumer credit act and are prevented from enforcement until such time as you comply.

 

2. The eLoanwas an account regulated under the Consumer Credit Act 1974. Which you have acknowledged

 

3.On XXXXXXX date you unlawfully repudiated your obligations under that alleged agreement which i have accepted and therefore the agreement- if it were ever to have been a properly executed and/or legally enforceable agreement was unlawfully terminated In the event that the alleged agreement were to prove t be properly executed and/or legally enforceable (which is denied), then you would be entitled at termination to the outstanding arrears which i would ask you to advise me of, against which there may be a counterclaim for damages.

 

4. Following your unlawful termination of the alleged agreement, and in contravention of the banking codes of practise you appear to have debited an amount equal to the balance of the aforementioned agreement against my my flexaccount thereby causing an unauthorised overdraft that i had not agreed to.

 

Your right of "set off" does not amount to or include a transfer of monies that were not yet due under a regulated credit agreement to which you were not entitled to by virtue of your failure to first serve a valid default Notice from my flexaccount

 

the right of set off may only be applied to accounts in credit and does not give you an entitlement to create an overdraft or further borrowing, nor to change a regulated agreement into an unregulated agreement or another regulated agreement to which i have not agreed

 

Indeed by your unlawful actions you have in fact "made a gift" of those monies.

 

 

 

5. You should remove the debit of this amount from my flexaccount immediately and note that if you fail to do so i will make an immediate complaint to the baking ombudsman OFT and Trading Standards

 

 

I would suggest that an informal and without prejudice meeting would be appropriate in the circumstances to discuss a mutually acceptable resolution of this matter

 

 

yours sincerely

[diddydicky]

electronic tick box in 2001?

 

im not all that well up on online applications but that seems a bit far fetched to me!

[diddydicky]

having sent the letter in post 58- i would not now refer again to the unlawful termination unless/until they come up with a properly executed/legally enforceable agreement

 

your tack now is

 

no agreement - nothing to talk about

[diddydicky]

they cannot simply transfer a balance from a regulated loan to your od

 

end of

 

personally i would write and tell them this and that they should either "put up" or "shut up"

[diddydicky]

i think you might be wasting your breath- the argument has clearly become circular

 

just throw down the gauntlet and see if they pick it up - after all - if they are intent on pursuing you it will end up in court anyway- alll you will be doing is cutting out a load of crap between now and then!!

[diddydicky]

place restrictions on NW licence with a probabtionery period to establish that they understand and will in future comply with oft guidlines and the banking code of practice

[diddydicky]

can u post it up

[diddydicky]

dear sirs

 

this argument has now become circular

 

you say your client has a valid claim, i say it doesnt

 

further correspondence, save for service, or any genuine attempt to resolve the matter will therefore be filed unanswered

 

y f