What is the Definition of Priority Debt (BCOBS)

[Amethyst]

We are currently responding to a consultation being held by the FSA and changes to what serves as the banking code, BCOBS, - yet more regulatory than that was. In it they are looking at the right of offset and have proposed a new definition of priority debt. Priority debts will mean if money in your account is known to be for these purposes the bank will not be able to take it to pay off anything of their own (like a c/card/loan and maybe bank charges)

Do you agree with this definition, if not why not, have they missed anything off?

priority debt

(in BCOBS) an obligation on the part of a consumer to make a
payment:

(a) where the remedies for a breach of that obligation potentially
include seeking possession of, or seeking to exercise a power
of sale in respect of:

(i) the sole or main residence of the consumer (for
example, an obligation to pay secured by a mortgage or
charge in respect of land, an obligation to pay rent
under a tenancy, or an obligation to make payment
under a licence to occupy land); or

(ii) the consumer’s essential goods or services (for
example, an obligation to pay under a hire purchase,
conditional sale or hire agreement that relates to, or an
obligation to pay secured by a charge on, the
consumer’s cooker, refrigerator, or the means to travel
to work); or

(b) where that obligation arises out of an order of the court, an Act
or secondary legislation (for example, an obligation to pay
council tax, child support maintenance, income tax or court
fines); or

(c) where that obligation arises under a contract for the provision
of utility supplies (for example, water, gas or electricity).

Their proposed definition of offset is

right of set-off (in BCOBS) any right of a firm, whether under a contract for a retail
banking service or the general law, to set-off or combine any debt due
from a consumer or debit balance on an account held by a consumer
against or with any sum payable by the firm to the consumer or credit
balance on an account held by the consumer.

Any thoughts ?

[Amethyst]

Re: What is the Definition of Priority Debt (BCOBS)

For further information - this is the section with the new wording

(before using set off the bank will)

(1) review the information available and accessible to the firm relating to
the consumer’s account, on an individual basis, and estimate the
amount of any subsistence (see below) balance;

(the bank will...)
(2) refrain from seeking to set-off or combine:

(a) any debt due from, or a debit balance on an account held by, a
consumer against or with that subsistence balance;

(b) any debt due solely from a consumer, or any debit balance on
an account held in the sole name of a consumer, against or
with any sum of money payable by the firm to that consumer
and another person jointly or any credit balance on an account
held in the joint names of that consumer and another person;

(c) any debt due from, or a debit balance on an account held by, a
consumer in a personal capacity against or with any sum of
money payable by the firm to the consumer or standing to the
credit of the consumer in an account held with the firm, where
the firm knows or reasonably ought to know that:

(i) a third party is beneficially entitled to that money or
that the consumer is a fiduciary in respect of that money; or

(ii) the consumer has received that money from a
government department or local authority for a specific
purpose or is under a legal obligation to a third party to
retain and deal with that money in a particular way.

c)ii) means things like Housing Benefit and LHA (not income support/jobseekersetc)

subsistence balance

Essential living costs – these include costs such as housekeeping, transport, and health and social care payments. They will be difficult to determine in the case of some customers, so we think it will be sufficient for firms to make reasonable estimates about the amount required for a customer’s subsistence balance.

Priority debts – where non-payment can result in consumers being imprisoned,
losing their home or losing their essential goods and services. These include
mortgage/rent payments, utility bills and council tax.

Have I gone on too much again.