BCOBS question.............

[InCourt]

Firm's liability for unauthorised payments

BCOBS 5.1.11
01/11/2009
FCA

(1) 4Where a banking customer denies having authorised a payment, it is for the firm to prove that the payment was authorised.
(2) Where a payment from a banking customer's account was not authorised by the banking customer, a firm must, within a reasonable period, refund the amount of the unauthorised payment to the banking customer and, where applicable, restore the banking customer's account to the state it would have been in had the unauthorised payment not taken place.


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If a bank took a customers account into an unauthorised overdraft state, has it breached the above regulation?
My thoughts are.......if the firm has to prove that the payment was authorised, it has compromised its case already by charging for an unauthorised overdraft.

[labman]

Re: BCOBS question.............

As a total amateur on BCOBS, I would ask for what reason the customer went into the unauthorised overdraft?

Say he had an agreed overdraft limit of £500, and he was £490 O/D. He then purchases something on his debit card for £20 which he authorises by putting in his PIN, he goes into an unauthorised overdraft, but he has authorised the payment to cause it.

In the same scenario, £500 O/D agreed, customer is £490 O/D and a DD or SO for £50 goes out, the customer has authorised the payment by not cancelling the DD or SO.

That would seem a logical argument for the bank to me, but I know nothing about it!

[FlamingParrot]

Re: BCOBS question.............

That's one scenario, I have another: there is no arranged O/D facility attached to the current account. When the customer is not using the account to get paid, the bank starts charging a monthly fee as well as for a service the customer never actually agreed to have. The account goes into O/D and the bank charges interest and unauthorized O/D fees, etc. The account gets overdrawn by over £300, all unauthorized, as there was no O/D in the first place. In this case, the customer has not authorised the payments, but the bank has taken them anyway. The above actually happened to me a couple of years ago, sadly it was a business account (ltd co).

[labman]

Re: BCOBS question.............

So basically it appears to boil down to how and why the O/D occurred.

There's a lot to be said for basic accounts, though I know that doesn't help in a business scenario. As usual the banks have us by the sphericals.

FP - you know I hate banks as much as you do (well nearly!) Playing devils advocate in your situation, would the bank not say the T&C's stated that your pay must go into the account, so by not adhering to the T&C's you had effectively authorised the overdraft?

The misselling of packaged accounts is rapidly becoming the next ppi, but it will be on a smaller scale financially.

[FlamingParrot]

Re: BCOBS question.............

So basically it appears to boil down to how and why the O/D occurred.

There's a lot to be said for basic accounts, though I know that doesn't help in a business scenario. As usual the banks have us by the sphericals.

FP - you know I hate banks as much as you do (well nearly!) Playing devils advocate in your situation, would the bank not say the T&C's stated that your pay must go into the account, so by not adhering to the T&C's you had effectively authorised the overdraft?

The misselling of packaged accounts is rapidly becoming the next ppi, but it will be on a smaller scale financially.

No, the T&Cs could never state my pay should go into the account because it's not a personal account where you'd get a monthly salary paid, :nono: it's a business account for a limited company.

[InCourt]

Re: BCOBS question.............

Are we any closer to defining unauthorised payments?

[Guest]

Re: BCOBS question.............

Are we any closer to defining unauthorised payments?

A debit that was not authorized by the account holder.

Taking the account into an overdraft situation just creates a negative balance, the charges are a fee for consideration of the overdraft facility and are authorized when the current account agreement is made.

[InCourt]

Re: BCOBS question.............

Cheers Andy. I wasn't really interested in charges, as they seem to already have a status of their own, i.e we know they're not unfair and they are competitivley priced etc. !!!
I'm more interested in discussing or finding out what scenarios are "unauthorised payments" in the strictest sense.
We know an agreed overdraft allows you to draw on credit. If you go beyond that limit,or rather if your banker pays out beyond that limit he has 'authorised the payment'. Is there an anomally between "unauthorised payments" and "unauthorised overdraft" ? In the strictest sense they are the same thing?

[EXC]

Re: BCOBS question.............

It's a very grey area - see first instance bank charges test case judgment at para 55 http://www.justice.gov.uk/downloads/...n-jul-2013.pdf

[Guest]

Re: BCOBS question.............

Cheers Andy. I wasn't really interested in charges, as they seem to already have a status of their own, i.e we know they're not unfair and they are competitivley priced etc. !!!
I'm more interested in discussing or finding out what scenarios are "unauthorised payments" in the strictest sense.
We know an agreed overdraft allows you to draw on credit. If you go beyond that limit,or rather if your banker pays out beyond that limit he has 'authorised the payment'. Is there an anomally between "unauthorised payments" and "unauthorised overdraft" ? In the strictest sense they are the same thing?

From an accountants point of view and purely in terms of the current account the debit would just represent a negative balance, i think this is as far as the BCOB goes.

The status of that overdrawn balance is another issue and does in fact become regulated drawing under the CCA and subject to most of its requirements.