HSBC's use of overdraft on current account to pay credit card

[goldengirl]

My sister has had a business account with HSBC for 10 years and an HSBC business credit card since 2007. Having made some late payments on the card over the last two years but always having rectified this within 2-3 months, HSBC has, without warning, taken the balance out of her current business account (£2000) and also used the maximum overdraft facility on that account of £1000. She is now unable to pay her employees and is in trouble.

I have read that banks can exercise a right of set-off where they can take any funds in any accounts with that bank to settle arrears on another account. But can they use a customer's overdraft facility and thus create a further debt for the customer?

Other consumer forums seem to say that there is some confusion as to whether the right of set-off extends to using the overdraft facility. Even the FSA's guidance is supposed to be vague.

Does anyone have any information on this matter? I cannot find a reference to this precise question on the FSA site but only reference to banks taking credit balances.
Thanks alot

[Caspar]

Re: HSBC's use of overdraft on current account to pay credit card

I believe it is possible for them to do it, but I'll contact someone who will know for sure with a reference to this thread for you. Obviously I don't know whether they'll get back tonight or not.

[calamity jane]

Re: HSBC's use of overdraft on current account to pay credit card

Before a Bank can exercise the right of "set off" ,certain conditions must be met.

One of these is that the debt must be due and payable, i.e. if a months payment of a loan/credit card is missed, then (unless they have terminated the agreement) they can only take the missed payment.

banking: firms' right of "set off"




CJ

[leclerc]

Re: HSBC's use of overdraft on current account to pay credit card

My sister has had a business account with HSBC for 10 years and an HSBC business credit card since 2007. Having made some late payments on the card over the last two years but always having rectified this within 2-3 months, HSBC has, without warning, taken the balance out of her current business account (£2000) and also used the maximum overdraft facility on that account of £1000. She is now unable to pay her employees and is in trouble.
Has she spoken to the bank when she has had these problems?
I have read that banks can exercise a right of set-off where they can take any funds in any accounts with that bank to settle arrears on another account. But can they use a customer's overdraft facility and thus create a further debt for the customer?
They can use the right of set off but to put your business in trouble is something that I am not sure they can/should do.
Other consumer forums seem to say that there is some confusion as to whether the right of set-off extends to using the overdraft facility. Even the FSA's guidance is supposed to be vague.

Does anyone have any information on this matter? I cannot find a reference to this precise question on the FSA site but only reference to banks taking credit balances.
Thanks alot

I am going to ask amethyst to take a look at this one as it involves a business account and the right of set off.

[goldengirl]

Re: HSBC's use of overdraft on current account to pay credit card

Thank you for this advice. It seems that the bank's action was more draconian than I first thought. Three times since June 2009(after our mother died) my sister has missed two consecutive payments and then brought the card account up to date on the third month. Normally she has been in contact with the card holder. This time she had missed two consecutive months and there were no funds at all in her business account. On the day she paid off the two months payments, HSBC, without warning, took £3000 from her business account using up the rest of the overdraft facility and then taking her £1000 over that facility. The manager of the business account branch has said he is dissatisfied with this action and has refunded the penalty charge of £56 (for exceeding her facility) and extended her overdraft by £1000 to cover the amount. She has now no overdraft facility left to run her business. Any further help would be appreciated.

[leclerc]

Re: HSBC's use of overdraft on current account to pay credit card

Thank you for this advice. It seems that the bank's action was more draconian than I first thought. Three times since June 2009(after our mother died) my sister has missed two consecutive payments and then brought the card account up to date on the third month. Normally she has been in contact with the card holder. This time she had missed two consecutive months and there were no funds at all in her business account. On the day she paid off the two months payments, HSBC, without warning, took £3000 from her business account using up the rest of the overdraft facility and then taking her £1000 over that facility. The manager of the business account branch has said he is dissatisfied with this action and has refunded the penalty charge of £56 (for exceeding her facility) and extended her overdraft by £1000 to cover the amount. She has now no overdraft facility left to run her business. Any further help would be appreciated.

Is the credit card now in credit?

[MIKE770]

Re: HSBC's use of overdraft on current account to pay credit card

Hang on they should ring/contact you first before actioning to give ( warn you), as a matter of discipline, it is something HSBC use to do, or is it a case of greed on draconian charges now?? also did she contact HSBC at any time prior to this?

[leclerc]

Re: HSBC's use of overdraft on current account to pay credit card

Hang on they should ring/contact you first before actioning to give ( warn you), as a matter of discipline, it is something HSBC use to do, or is it a case of greed on draconian charges now?? also did she contact HSBC at any time prior to this?

Warning someone of the Right of Set Off is not a requirement or something that they have to do.

[MIKE770]

Re: HSBC's use of overdraft on current account to pay credit card

Warning someone of the Right of Set Off is not a requirement or something that they have to do.

They use to contact you and point out that you have funds in another account and it would be an idea to use these to correct situation, nobody has said they had to do, only that it was their system then. Therefore you knew the consiquences of charges if not followed.