The BBC Money Box programme has “discovered” that banks are allowed to take credit balances people hold with them to pay that person’s debts. Quite a discovery, I wonder if Peston had anything to do with this startling revelation.
Exercising right of set-off was quite routine when I did a stint for the NatWest debt recovery office about 10 years ago. It was an unspoken rule that we only did it when people were taking the piss – the kind of people who owed the bank 10 grand and offered to pay it off at a tenner a month but had a holiday fund, Sky TV and spent 200 quid a month on fags and booze.
Citizens Advice is asking banks not to exercise their right of set-off any more because it leaves people unable to pay their mortage and other bills.
They are quite right, it does leave them unable to pay their bills but why should a bank forego their right to claim money that’s been deposited with them to pay off a debt that the same person has with them? If someone owes a bank money and they’ve got the means to pay all or part of that debt in another account with the bank, why is it unreasonable for the bank to expect them to do so? It’s no different to a mortage provider having the right to reposess and sell someone’s house if they don’t pay the mortgage, they just don’t have to go through a lot of expensive hoops to get their hands on the assets.