Nationwide Offseet Loan From Current Account - Now In OD!

[vint1954]

Have you actually spoken to Nationwide?

 

It is only my experience, but they have in the past been very helpful, but I could be the odd one out.

 

Start at your branch and they may point you somewhere else. If a couple of calls makes them realise that they have been rumbled, they may reverse the situation.

 

Still complain to FOS though.

[Stagparty]

Diddydicky - thanks for the information - I'll certainly consider involving the Mail if Nationwide start to play hard ball.

 

Vint - I haven't spoken to Nationwide about this particular incident, but I've found them spectacularly unhelpful regarding my situation and my credit card. I have written a letter of complaint to them, to be honest the staff in the branch now are getting more and more junior and have little by the way of knowledge and even less authority. This is without doubt a Head Office mandated transaction. I do sincerely wonder if they are trying to punish me as a result of me querying the validity of the Credit Card Agreement.

 

It will be interesting to see what comes back from Nationwide (if anything)

[Stagparty]

A quick update, I spoke to someone at the FSA today and they seemed quite interested. A case worker shouls be contacting me for more details shortly.

[Stagparty]

Update time - and there is no good news - the FSA case worker contacted me and said it wasn't something they get involved with.

 

I've had a letter from Nationwide today basically saying they can do what they want without reference to me and thats what they have done. Furthermore if I don't agree to their repayment schedule they will pass it to KPR and issue a default.

 

I haven't had a reply to my CCA request for the E-Loan yet.

 

So it appears that they can, and have, taken a regulated agreement and "de-regulated" it.

 

To say I'm despondent and upset about this is an understatement.

 

If anyone can help I'd be really grateful.

 

Thanks in advance

SP

[Stagparty]

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?

[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.

[Stagparty]

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.

[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

[Stagparty]

So write and complain formally, stating that they have effectively used set-off incorrectly and suggest they seperate the accounts back out. Warn them at the same time that a complaint will be made to the Banking Onbudsman?

[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

[Stagparty]

Or should I write and query under what term they believe they have the right to perform such a transaction first?

[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

[Stagparty]

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?

[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)

[Stagparty]

I'm beginning to see where you're coming from with this Diddy. So in an ideal world I need them to confirm that they have indeed terminated the E-Loan albeit by transferring it to the FlexAccount overdraft?

 

That coupled with a copy of the agreement should hopefully put me into a stronger position. Would you agree?

 

Rather than go all out and come straight out and accuse them of unlawfully terminating the agreement is it better to lead them into this with a series of apparently innocent questions?

 

If I've understood this correctly, if a creditor terminates an account on the back of a defective default notice then they can only claim the arrears at the time of the termination. Is it the same when an account is terminated and no default notice has been issued?

[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

[vint1954]

Update time - and there is no good news - the FSA case worker contacted me and said it wasn't something they get involved with.

 

I've had a letter from Nationwide today basically saying they can do what they want without reference to me and thats what they have done. Furthermore if I don't agree to their repayment schedule they will pass it to KPR and issue a default.

 

I haven't had a reply to my CCA request for the E-Loan yet.

 

So it appears that they can, and have, taken a regulated agreement and "de-regulated" it.

 

To say I'm despondent and upset about this is an understatement.

 

If anyone can help I'd be really grateful.

 

Thanks in advance

SP

Stagparty, they cannot give you an overdraft or incresed overdraft, without you agreeing.

[Stagparty]

Another update guys, I've had a letter from NW again not stating which terms they believe they can do this. I've still not received a copy agreement under my CCA request.

 

I've also found out that NW have been very crafty - they haven't closed the e-loan account, they have left a nominal balance in there so I don't think they have terminated the agreement and hence the unlawful rescission wouldn't apply.

 

Can anyone please suggest a fairly firm rebuttal of their position please?

 

Thanks again

SP

[Stagparty]

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

[Stagparty]

Can anyone on the evening shift help with this please?

[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

[vint1954]

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

You will need to check your agreement, however I would think that any combining of accounts would have to be with credit ballance accounts. They cannot turn a regulated agreement into an overdraft.

[Stagparty]

Time for an update - this has been rumbling along and correspondence has been bouncing back between us but NW have now referred the matter to KPR.

 

A quick summary of the facts to help anyone new coming to the thread

 

1. NW transferred the outstanding balance on an eLoan to an existing overdraft without notifying me.

 

2. The resultant overdraft was £10000+ over it's original limit

 

3. The interest charged on the overdraft is over double what was charged on the eLoan account.

 

4. NW have confirmed the eLoan was a regulated agreement

 

5. NW believe they have the right to do this based on the terms and conditions of the accounts.

 

6. NW have not used the word "terminated" when referring to the eLoan, instead using the phrase "collapsed into the flex account". They have though confirmed in writing the facility is no longer available to me.

 

7. NW have still not responded to a s77/78 request made last June/July

 

8. NW have withdrawn the overdraft facility in its entirity although they haven't written to me confirming this.

 

9. NW issued a default notice on the Flex Account demanding all sums due, although this wasn't quantified. The Default Notice is defective at least in so much as they did not allow any time for service.

 

10. NW have now written and confirmed they don't want me to bank with them any more.

 

11. The matter has been referred to KPR.

 

12. My initial complaint is now at "Final Answer" stage so is eligible to go to an "independent" part of NW to review it and see if they have acted correctly.

 

I think I have two options and would be grateful for advice and comments:

 

1. Proceed with the formal complaint and then pass it on the the Ombudsman when the review concludes NW are correct.

 

2. Now that the DN has been served and they have confirmed they don't want me to bank with them anymore, write and accept the unlawful termination of the eLoan and advise them of a potential counter claim for unlawful rescission of contract. Follow that with written acceptance that they have terminated the current account and that the DN was defective in so much as the amount they claim is owed is approx £17k too much, time for service was not allowed in the DN and the DN failed to state precisely what I needed to do to rectify any breach. The DN was served under s87(1)

 

Any advice would be really welcome, especially bearing in mind the potential for confusion between regulated and unregulated agreements and also the DN on the Flex Account being invalid.

 

Thanks in advance!

[vint1954]

have you been on to the FO about the unauthorised increse in the overdraft