Concerning use of ‘Set Off’ techniques by banks openly criticised

23rd September 2010

Many people who are struggling to manage financially are unaware of the risk they face from their bank “setting-off” their income against other debts. This can be a particular risk in the run-up to embarking upon a debt solution such as a trust deed.

Cross-selling by banks has ensured many of us hold credit cards and personal loans with our bank as well as a standard current account. But were you aware that if you do not pay your debt on the card or loan on-time the bank could simply remove the money from your current account to do so themselves? Hidden in the small-print of banking contracts lurk the clauses that make this possible.

The impact of this on individuals and families can be dreadful. The support team at Trust-Deed.co.uk have spoken with many callers who have been left, sometimes for weeks, with no money to pay for essentials such as food, housing and utility bills.

How is this justified by the banks? Unbelievably they have been known to claim that taking money in this way helps people in debt by helping them to clear their arrears! Small comfort when there’s no food on the table.

The Scotsman has reported that this practice only affects around 2% of bank customers, but the figures amongst those who are struggling to manage debts are significantly higher.

Individuals considering debt management solutions such as trust deeds are advised to open new current accounts, with a bank that they owe nothing to, in advance of beginning the formal processes involved. Only by ensuring that a bank they owe money to cannot unilaterally remove their income, can they be sure to manage their own essential needs and the payment of the trust deed itself.

Earlier this year the banks themselves became subject to minimum standards introduced by the Lending Standards Board. They suggest that an individual’s income is only used to repay non-priority debts once provision has been made for priorities such as housing costs and utility supplies. The banks are also expected by the Financial Ombudsman Service to give an individual a reasonable opportunity to repay the debt first.

The debt advisors at Trust-Deed.co.uk have not witnessed much beneficial improvement as a result of these standards and expectations. Anyone who owes money to their bank and who is considering dealing with their debts using a Trust Deed or any other solution is urged to commence the process of moving their current account to protect their finances and essential needs.

For a trustworthy and comprehensive resource of advice regarding debt management plans and protected trust deeds, visit the trust deed advice forum on this website .

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