Benefits and Bank charges---The Myth exposed

nattie

New Member
Sep 3, 2008
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The early phase of the bank charges campaign initially stated that a Bank could not charge if the individual was on benefits. The Law quoted was under section 187 of the Social Security Administration Act 1992 and/or Section 45 of the Tax Credits Act 2002. I recently was made aware of a petition about this. The link below sets out the government position.
Number10.gov.uk Sections187and45 - epetition response

To quote from the First part of it....
"The purpose of the Social Security Administration Act 1992 Section 187 and section 45 of the Tax Credits Act 2002 is to prevent people’s benefit money being at risk by it being assigned over to a third party in settlement of a debt. It is not intended to prohibit the application of bank charges. Bank charges are in the nature of an expense, and are incurred by the holder of the account; tax credits and benefits are payable in order to help customers meet their expenses, and as such it is legitimate for banks to deduct charges from the balance of an account held in that bank, whether the money paid into the account comes from tax credits, benefits or other sources, such as earnings."
 

Paul Carcone

Facilitator
Jun 22, 2008
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South Coast
www.carconeconsulting.com
I do have some sympathy with the response above...people of benefis should not be immune from charges that the rest of us have to pay if we mis-manage our finances.

That said, the amount that is charged, particularly by HBOS, is quite ridiculous. I am quite sure that, in these days of automation, that it does not cost the bank £38 everytime someone goes over their overdraft limit.

I suppose that there does have to be some sort of penalising fee to stop people doing it regularly...but I agree that £38 is completely over the top.
 

nattie

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Sep 3, 2008
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The issue was not whether the charges were fair but if the bank could take that from benefit payments. I agree totally with you that the amount of the payment debited for a return item is substantial based on the amount of the fee being debited. The OFT test case will determine whether the contract on bank accounts is assessable under the UTCCR 1999. Unfortunately as we know in court cases, it is not a fast process.
 

barbarp

Facilitator
Aug 20, 2008
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Dorset
In some ways I hope that the banks get stung over this because their treatment of people on benefits is very mixed, as someone who works in a psychiatric unit we often get people in who've run up huge amounts of debt whilst unwell {the largest I've seen was £60,000 in 5 months}
This is often not the fisrt time the person has done it, or even the second or third! The banks obviously have some degree of miscommunication or something between the criteria they use to lend or to allow people to get into debt like that when they are on benefits.
In other ways , the downside is that if they do loose, then the amount of services available to people will be seriously restricted...hmmmm I'll watch with interest.
 

Paul Carcone

Facilitator
Jun 22, 2008
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South Coast
www.carconeconsulting.com
The trouble with this whole argument is that the banks will come out as the bad-guys whatever they do. Personally, I do believe that they should seriously restrict their services to those who are psychiatrically ill...but I'm sure that banks do not have time to keep a watchful eye on the mental health of all of their customers....and if they did...there would be a volley of complaints about intrusiveness.

I don't really have much sympathy for many people who get themselves in bother with their banks. There are a few people who are very unfortunate and, through ill-health or some other unforeseen event, but I think a lot of people who end up in bother have been imprudent by running up a lot of debt to support a lifestyle they can't afford and by not generating sufficient savings to cover a loss of income over the affected period.

The current good guidance is to have relatively easy access to about 4-6 months of your salary. However, I don't think many people can say that they do...and this is why they become unstuck when some unfortunate circumstance strikes.
 

nattie

New Member
Sep 3, 2008
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I think it is a very difficult thing. What many of us do not realise is that debt in itself, can become a psychological problem. It can become an issue with our emotions. Having just enough to pay the bills and then the bank charge you to push you back under.
 

happywriter

New Member
Apr 25, 2009
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An interesting aspect is how the overdraft was made. There are few situations where the bank is not controlling the allowable overdraft - with that authority comes responsibility.
Banks can ensure a cheque would bounce, a cash withdrawal refused from a machine or bank, a card declined, etc.
A normal commercial company would not advance credit in those circumstances, why should a bank? Try buying groceries in Tesco without any funds!
 

tracer064

New Member
Oct 17, 2011
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i think it is disgraceful because i have been in the loop of charge on charge because DWP messed up my benefits and my bils didnt go out so i got 4 charges at £15 each and i couldnt afford to pay that when i gt £50 a week so it kept going every month and i couldnt eat properly and lost over 2.5 stone, when i managed to get this sorted by a friend my benefits got messed up again and i got in the same loop, im still having the problem and i need to buy alot because my son is due in 8 weeks and i cant work because i have fibromyalgia, depression and M.E. and i am on 23 tablets a day and in constant pain and no im even being told by the council that me and my partner are not entitled to a council home, people treat you like scum when your on benefits, i cant help being disabled, i would rather not be in constant pain and have a job to actually have money for a change
 

Bri69

New Member
Mar 8, 2012
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I'm looking at this discussion and getting more, and more unhappy about charges I've been hit with over two consecutive months, and am expecting to be hit with next month too.

What I would be most-grateful for is specific advice on incurring charges which take you over an agreed overdraft limit, then applying charges again where the bank's original charges were the cause of being over-limit.

Anyway, here's the story to-date.

I was made redundant last October; not the most "fun" of things, and I'd not been in the job long enough to qualify for any 'decent' level of payment.

I'm now in a situation where, for the last two months, I've been getting hit with ever-increasing bank charges. Despite cutting my expenditure back and back, the bank (yes, HBOS) are charging me fees on an unauthorised overdraft that came about through the application of the previous month's fees.

My mistake, it seems, was trying to keep on top of my bills. I paid Virgin Media early when I noted their direct debit was due the day before a benefit payment. I wish I hadn't, because when the direct debit was due, they took the money anyway.

I ended up filing an indemnity claim to get back the overpayment to Virgin, but not before accumulating £45 in charges. I then visited a local branch to appeal this on the basis of my circumstances (unemployed, minimal income). This was declined by the branch manager as I've had charges waived in the past [Another sorry tale; working, but in emergency accommodation as homeless, no access to cooking facility, charged obscene amounts in rent for temporary accommodation].

In addition to declining to waive the £45 in charges, I was informed I'd racked up another £60 - which is solely from the bank's application of the prior charges.

That, I cannot believe, is actually legal - regardless of a trite letter telling me I can deposit funds, clear the unauthorised overdraft, and not continuing incurring £5/day of extra charges.

Apart from double-checking I've collected all the paperwork (I never received my last statement) and going to the local CAB to check I take this through the full process to get it taken on by the Financial Services Ombudsman, has anyone advice on how to approach this? My quick calculations suggest that, with a benefit payment due, along with some direct debits, I will be left with £20 to cover electricity and food for the next two weeks.

Since my home branch is not in the town where I now live, is an appeal direct to that branch likely to be looked on with any sympathy?
 

Witch consumer

Moderator
Sep 8, 2008
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Debtors retreat
I can't tell you how angry this makes me, I cannot believe the government have not done something about it by now.

The best advice I can give you is to open a basic bank account with another bank and have your benefits paid into that, I would also suggest you pay your bills via internet banking rather than DD, I know some companies charge you for this but you are much better off paying acouple of quid to a creditor than hundreds of pounds to a bank.

There are some who feel this is covered by the Social Security Administration Act of 1992 but some research appears to show the banks have wriggled out of this one in exactly the same way as they did the OFT investigation and subsequent court case into bank charges.

Once you have your new bank account, complain to the FOS, putting the account in dispute, that should stop them charging you but as we know, banks think they are bullet proof.

At one time I could have given you step by step instructions to getting these charges back but unfortunately that door has been firmly closed.
 

nattie

New Member
Sep 3, 2008
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It has been some years since I have visited this forum and updated this thread and the username I have here is not one I use on consumer based forums, that is an aside.

The above discussions continue to come up on forums across the UK and so I want to state a few more things about those discussions.

Some people have had charges refunded by quoting the above and when they get a refund they claim it is because of the above. I disagree with that assumption but I do believe that the bank is spotting cases in which charges to people on benefits could have a massively detrimental affect on their financial well being and are looking at the issue of financial hardship more seriously.

http://www.lendingstandardsboard.org.uk/docs/lendingcode.pdf
The above link is to the lending code and section 9 is the one that is important. If charges are impacting on your ability to pay essential priority debts defined as debts that if you do not pay them you will be made homeless, have your utilities cut off, put you in jail if not paid and finally lose the transportation you need to go to work ie car on HP(not loan). Excluded from this are Credit cards/store cards and loans.
There is no template that could be produced or should be produced because the impact on charges will be different and the potential that charges create more charges is important as well.

Under the Business Code Of Business Standards(BCOBS for short) the bank have to look at your case sympathetically. Some have suggested that this is an avenue for reclaiming as well but the BCOBS does NOT cover overdrafts of loans so does not offer that avenue for anyone reclaiming charges.

I hope my updated post is helpful because it is a very misunderstood law.
 

Nicole123

New Member
Feb 13, 2014
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