First Right of Appropriation...offsetting debt against benefits RBS

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

replied to Natwest - bit narky and obvious but hey ho.

Dear Mr Guest

Thank you for your full response to my query. I do however have a couple of further questions.

With regards to the first right of appropriation only being able to be used if the customer is in a credit situation with their account, with respect, the need for appropriation would not often arise if a customer is in that position.

The main issue that arises is the bank offsetting benefit and low income payments against overdrafts, where the overdraft is unauthorised or is subject to withdrawal of the facility, and in situations of prior notification of unauthorised overdraft fees, where the fees if taken would leave the customer unable to access their housing benefit/LHA for paying their rent.

Could you clarify your position on having no obligation to encash benefits payments where they are offsetting an excess position, and there being no general discretion to waiver bank charges in these circumstances.

Kind regards, and my thanks for your continued assistance,

Sharon

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

Reply from Abbey




Your email of 9th March, addressed to Antonio Horta-Osorio, Chief Executive of Abbey, for was forwarded to me in the legal department.

You have asked about Abbey's policies in relation to a customer's first right of appropriation in respect of money intended to cover essential living expenses.

As you rightly point out in your e-mail, Abbey subscribes to the Banking Code 2008. It abides fully with the key commitments set out in it. This is particularly so in relation to our customers who experience or encounter financial difficulty.

We consider all cases of financial difficulty sympathetically and positively, on a "case by case" basis, and have a specialist team that is available to assist in this regard.

We also make it clear in Abbey's Bank Account Terms and Conditions that, where a customer has an overdrawn balance and they are unable to repay any money that they borrow from us, they should contact us at the first sign of financial difficulty and tell us about their full financial circumstances. We can then develop a plan to help the customer or, if appropriate, tell them where they can obtain free money advice. In addition, if they want us to, we will also work with debt counselling organisations on their behalf.

In relation to overdraft services, including the overdraft limit, that we may offer to a customer, this is based on each individual's circumstances and in line with Abbey's responsible lending policies. Again, where a customer may experience financial difficulty in relation to an overdrawn account, we advise them to contact us as early as possible so that a solution can be found.

I trust that the above deals with your questions.

Yours sincerely

Hans Schumann
n Hans Schumann n Legal Manager n Commercial Law Team n Corporate Services n Abbey
* hans.schumann@abbey.com ( 020 775 (64385) Ë 07795450710
+ TS6 A01, Abbey National House, 2 Triton Square, Regent's Place, London NW1 3AN
P Please consider the environment before printing

[enaid]

Re: First Right of Appropriation...offsetting debt against benefits RBS

So in simple terms, if you are within your arranged OD limit you can Appropriate your benefits.
If you are over the limit you will have your benefits taken.
Now what happens if you are in limit and appropriate and that takes you over the limit?
Do they pay it ? and add charges or do they refer it?


Example
OD of £200 account is £180 od and in goes my benefit £100 to come out same day is my rent and C Tax total £100. I can a appropriate this benefit then to pay these 2 items.

OD of £200 account is £210 od and in goes my benefit £100 therefore they can take the whole £100 leaving me with £90 inside my OD limit but I ca not appropriate that £100 to pay my rent and CT.

Is that what it means?

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

So in simple terms, if you are within your arranged OD limit you can Appropriate your benefits.
If you are over the limit you will have your benefits taken.
Now what happens if you are in limit and appropriate and that takes you over the limit?
Do they pay it ? and add charges or do they refer it?


Example
OD of £200 account is £180 od and in goes my benefit £100 to come out same day is my rent and C Tax total £100. I can a appropriate this benefit then to pay these 2 items.



OD of £200 account is £210 od and in goes my benefit £100 therefore they can take the whole £100 leaving me with £90 inside my OD limit but I ca not appropriate that £100 to pay my rent and CT.

Is that what it means?

Common law wise you can appropriate your benefit /incomewhether you are in auth or unauth OD.

If you have income/benefit of £100 going in to the bank and it would otherwise be swallowed up in authorised overdraft you can appropriate it to pay your co tax/rent £100.

But the banks are saying that they hold the first right of appropriation and will repay themselves before allowing you to appropriate further.

So if you are £50 over your OD facility and expect a payment in of £100 they will only allow you to appropriate £50.


Appropriation also stands where you have a number of cheques or DD's due on the same day (or from the same income period) say XXX,YYY & ZZZ . So you can say Pay XXX first, then YYY, then ZZZ- so that the most important one definately gets paid.

Although the banks won't let you pay XXX first if YYY is due to the bank (for loan/charges etc)


What most of the banks are saying seems to be its not in custs best interests to allow them to appropriate, and the right of appropriation is over ridden by the terms of the account.

So we want to find out if common law is kyboshed by T&C's that are not statute (statute Terms can override common law) and if that is fair (in terms of UTCCR). I think anyway.

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

And a much better response from Barclays after my follow up letter

Dear Ms Amethyst,

Thank you for your follow-up email. Barclays only exercises its right to set off (appropriating funds to pay off other debts) when a customer's account is in arrears and so has entered our collections process. In these circumstances, our process has been designed to provide customers with reasonable headroom for basic needs. If a customer were to request us to do so, we will reverse set-offs in whole or in part where not doing so would cause hardship and ask the customer to make alternative payment arrangements for their outstanding arrears.

As I mentioned in my earlier letter to you, Barclays aims to contact customers that find themselves in collections as soon as possible so that we can agree a solution that both supports the needs of the customer and is acceptable to the bank. All this work is undertaken by a highly trained specialist central team, not by staff in our branches, which is why it is very important that customers respond to communication from this team about their account.

If an account is not in arrears, we are not structured to administer accounts in such a bespoke way. In these circumstances, the administration of current accounts is driven by set processes and is highly automated, with only limited intervention by branch and other customer service staff.

This is the only economic way to administer millions of current accounts. Accommodating customer instructions to apply particular income to fund particular payments would involve extensive manual interventions and individual account monitoring. We would need to employ many more staff than we do now and we would also need to make major alterations to our processes and computer systems to be sure of being able to give effect to such arrangements in a mass market environment. The cost of all this would be very high indeed and would almost certainly involve higher costs for our customers.

It seems to us that appropriation is largely does not impact our customers unless they are in financial difficulties, in which case the specialist services I referred to earlier will ensure that their essential needs are met. As such, we think the costs of giving effect to it do not justify the benefits to our customers. However, if a customer who is not in arrears genuinely wished to use specific income, for example housing benefits or local housing allowance payments, for specific outgoings such as rent, they could open a Barclays Cash Card Account (basic bank account with no overdraft, available to all (including undischarged bankrupts) except those with a record of fraud) to receive just that income into and make just those payments out of. This small step empowers customers to take control of their own budgeting and money management.

We are aware that a few local authorities have suggested that customers appropriate benefits towards outgoings such as rent. The position here regarding set off is the same as for any other credit to the account, but of course the policies I have referred to previously should still ensure that the customer's needs are met.

I hope this addresses your concerns and provides a practical solution to consumers in the circumstances you describe below.

Yours sincerely,

Catharine French

Catharine French

Customer Services Director

Barclays UK Retail Banking

[enaid]

Re: First Right of Appropriation...offsetting debt against benefits RBS

Oh Highly Automated eh lol and only limited intervention by staff lol
So that can't go in the costing when we get to find out the real costs.

Anyway on paper that seems quite fair to me, thing is do they practice what they write?

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

However, if a customer who is not in arrears genuinely wished to use specific income, for example housing benefits or local housing allowance payments, for specific outgoings such as rent, they could open a Barclays Cash Card Account (basic bank account with no overdraft, available to all (including undischarged bankrupts) except those with a record of fraud) to receive just that income into and make just those payments out of. This small step empowers customers to take control of their own budgeting and money management.

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Would they allow the barclays cash card account which is used for that purpose to be used to offset a current account in unauthorised overdraft ?


am looking into terms of both accounts and asking if the terms override common law seeing as they arent set in statute.

IS offsetting just a term in a contract or is it set by statute ? I think just a contract term....which overrides common law of froa thus makes it unfair (maybe)

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[enaid]

Re: First Right of Appropriation...offsetting debt against benefits RBS

Well if its in their T&C's that they can take money from any other account to offset a current account, then yes I think they would.
We need the T&C's lol

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

Cash Card Account - Current accounts from Barclays - Barclays Personal Banking
CARD CASH ACCOUNT

Barclays Bank Account - Current Bank Accounts - Barclays
CURRENT ACCOUNT


right of offset between the two and control current accounts / allowing repayment arrangements on overdrafts rather than swiping by offset etc. and putting stop on accounts sooner etc. and actually looking at account activity before offsetting (eg £100 in £100 out to rent then dont offset it)

£8 welcomed as is not paying unguaranteed items. ref t&C's.

PCA report - allowing repayment of ODs before default situation for hardship

Whenever a payment is made that would cause you to exceed the limits on your personal current account as follows:

• Exceeding your overdraft limit by £1 and you do not have a Reserve; or
• Exceeding your Reserve limit by £1; or
• Taking your personal current account overdrawn by more than £15 and you have neither an overdraft or a Reserve on your personal current account then, unless the payment is a Guaranteed Transaction (which we must honour), the payment will be returned unpaid and we shall charge you a Returned Transaction Fee.

working on reply just making some notes.

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

Dear Catharine,

Thank you for your comprehensive response to my queries, it is very much appreciated.

I take on board your comments regarding the cost of administering accounts in such a way, and agree with you that the use of first right of appropriation would affect only a small number of your customers who are suffering from financial hardship.

The remedy you have suggested is one we have recommended to people in the past, however there have been issues with the right of offset between accounts and that is one I would like to clear up if possible.

Barclays retain the right to offset funds between accounts, so if a customer does as you have suggested and retains a basic card cash account for the sole purpose of having housing benefits/LHA paid in and then out to their housing association either as a direct payment or by cash withdrawal; and falls into an unauthorised overdrawn position on their standard current account; would Barclays exercise the right of set off from the basic account to cover the unauthorised overdraft.

I understand the circumstances would need to be severe in order for this to occur, however it is one concern of holding multiple accounts within the same bank.

You will be aware of the Personal Current Account market study that the Office of Fair Trading is currently working on. I am part of a team of volunteers who have submitted a response to their consultation from the consumer perspective. I believe we give a balanced view and offer some sensible remedies.

One of which is for the banks to allow consumers in financial difficulty to make arrangements to repay overdrafts when they fall into financial difficulty, before a default situation occurs. Should a customer become overdrawn with Barclays, through the use of guaranteed payments/charges, then they should be able to ask the bank to allow repayment of the overdraft on a monthly basis, without the fear of the entire overdraft facility being withdrawn and repayable immediately, or being offset from other accounts such as savings/basic accounts. This I believe would make the option of holding a second account for self appropriating payments more viable for consumers in difficulty.

I do commend Barclays for the introduction of the £8 Returned/Guaranteed Transaction Fee and the clearer terms that stop mulitple unguaranteed paid items taking customers in to unauthorised overdraft situations. stupid sentence. There have been some major problems, from our perspective, with the Reserve facility and the charges for it. Hopefully Barclays is looking at those issues and working on resolutions. The main issue as I see it was the use of Opt Out as opposed to Opt In to the Reserve facility when the Reserve was first introduced.

I have attached, if you should be interested, a copy of our response to the OFT. It is a public document.

arrrrrrrrrghhhhhhhhhhhhhh have I waffled randomly too much and lost my thread...I think so - need to be more concise. Don't think i can put to her about the terms and conditions overriding common law ?- save that for nationwide as that was their contention - well i cant think how to word it anyhow. Please slate the above as much as possible will have a coffee and come back to it in a while.

[natweststaffmember]

Re: First Right of Appropriation...offsetting debt against benefits RBS

"Dear Catharine,

Thank you for your comprehensive response to my queries, it is very much appreciated.

I take on board your comments regarding the cost of administering accounts in such a way, and agree with you that the use of first right of appropriation would affect only a small number of your customers who are suffering from financial hardship.

The remedy you have suggested is one we have recommended to people in the past, however there have been issues with the right of offset between accounts and that is one I would like to clear up if possible.

Barclays retain the right to offset funds between accounts, so if a customer does as you have suggested and retains a basic card cash account for the sole purpose of having housing benefits/LHA paid in and then out to their housing association either as a direct payment or by cash withdrawal; and falls into an unauthorised overdrawn position on their standard current account; would Barclays exercise the right of set off from the basic account to cover the unauthorised overdraft.

I understand the circumstances would need to be severe in order for this to occur, however it is one concern of holding multiple accounts within the same bank. "

There ya go, get rid of the rest for the time being.

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

An excellent reply from RBS following my follow up email to them ( Legal Beagles )(quoting their document back at them from the first post in this thread )

Thank you for your further e-mail of 24 March and I will look to answer the further points you have raised.

My earlier e-mail did not state that the first right of appropriation can be used only when the account is not overdrawn. It can be used regardless of state of the account - the only criteria are that the debits to which the appropriated fund is to be applied must be identified and the appropriated fund must be in the account no later than when the debits are presented for payment. Our experience is consistent with your statement that this right is mainly used when the customer is experiencing financial difficulties.

As regards housing benefit/LHA the appropriation can only work if the rent is debited by direct debit or standing order to the account.

You mention the bank 'encashing benefits payments' - we do not cash these cheques or similar orders as they are invariably crossed meaning they must be paid into a bank account. When paying a benefit payment into the bank account the first right of appropriation can be exercised against identified future debits.

As to there being no general discretion to waive bank charges, the terms and conditions of an account do state that charges will be levied if sufficient funds are not available to meet a payment. Having said that, my earlier e-mail did say that our policies, developed with the Banking Code in mind, do look to provide support to our customers. Each case will be looked at sympathetically and individual circumstances taken into account. Consideration will be given to waiving fees to help the customer but we do need customers to be open and honest with us so that we have as full a picture as possible of their circumstances.

Yours sincerely



Mike Guest
Manager, Group Customer Relations

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

http://www.mind.org.uk/NR/rdonlyres/...alfinances.pdf

sponsered by RBS.

Hmmm are they going up in my estimations?

[EXC]

Re: First Right of Appropriation...offsetting debt against benefits RBS

Nice work

[Amethyst]

Re: First Right of Appropriation...offsetting debt against benefits RBS

Nice work

aye but what to do with it?

We want an across the board policy don't we, better training so frontline staff are aware of the right so its not a lottery whether your appropriation gets actioned.

We possibly need to look to the OFT regarding Nationwide possibilty of unfair terms (ref the common law etc thread)

Kitty Usher/DWP - regarding financial inclusion and inalienability of benefits extending to bank charges/offsetting.

Getting councils etc correctly advising on its use.