Banking set-off under fire

Despite winning November's court cast against the Office of Fair Trading (OFT) on overdraft charges, Britain's banks are still very much on the back foot.

Many bank charges have been cut since the judgment, but attention may now be shifting to another unfair practice, known as "set-off".

Vance Parsons, Director of Atlantic, says, "The right of 'set off' or a right to 'combine' accounts can be very unbalanced in its application by your bank.

Seldom do banks do this to your benefit, for example, move money from a savings account when you go over your overdraft limit and consequently avoid a £35 charge.

The Financial Ombudsman Service (FOS) has warned that banking groups have rights to use balances in one account to pay for debts a customer has elsewhere.

And with more and more banks part of the same groups – for example, Abbey and Alliance and Leicester are both part of the Santander Group – customers can find their money disappearing to pay for their personal debts within the banking group, sometimes before priority creditors like your mortgage provider.

Another watchdog, the Lending Standards Board, recently stressed the need for banks to use this right to set-off fairly and with sensitivity to clients' financial problems.

Vance Parsons goes onto say that, "Treating customers fairly is meant to be at the heart of the lending code, but the fact remains that banks suit themselves when to look at the 'overall position'".

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