Banks are leaving people unable to pay mortgages by taking money from their current accounts to cover credit card and loan debts according to report on Saturday?s edition of BBC Radio 4 ?Moneybox.?
There are now calls for banks to scrap the practice, which allows them to transfer funds without permission. Reports show that there has been a 25% rise in the number of such cases in each of the past two years. The British Bankers’ Association says the onus is on customers to talk to their banks if they are in difficulty.
In most cases, companies can only force someone to pay a debt by taking them to court.
However, as BBC Radio 4’s Money Box discovered, the Right of Set Off allows banks to legally transfer cash to pay credit card or loan arrears without account holders’ permission.
The programme reported that there have been cases of people having benefit payments removed from accounts, leaving them unable to meet “priority debts” like mortgages and council tax.
The British Bankers’ Association says cases where money has been removed “inappropriately” are regrettable but that banks take their responsibilities under the banking code seriously.
Nick Pearson from Paymex Group echoed the concerns raised by the BBC. He noted that ?The right of set off is a term and condition in most agreements used by the major lenders. It is disappointing that some lenders make use of this obscure clause in this way as it may help undermine efforts to ensure that the number of mortgage repossessions is kept as low as possible.?