Warning for all with overdrafts

[tomme]

For various reasons including my husbands v ill health a few years ago we have been living in my overdraft which had a limit of £6,300 we have slowly been reducing the amount we go overdrawn every month so that within the next 18 months we wouldn't need an overdraft at all.

My bank have reduced the overdraft limit this month by £1200 having reviewed my account, now thankfully it won't imapct on us because we have been reducing the amount we go overdrawn every month.

However I thought it was worth a thread just to say that the bank can reduce an overdraft whenever they want and reserve the right to withdraw the overdraft at anytime. I had forgetten their right to withdraw at anytime until the conversation I just had with my bank and so thought it worth a reminder to anyone else who regularly uses their overdraft.

I know, I know before anyone points it out that this is not an ideal way to live and we never used to which, is why we have been reducing it.

bump

That is a very apt reminder. My reduction in tax credits will mean that there is not enought money going through the account it gets paid into so santander bastards will probably remove the facility :( Time to plan ahead

I think it's a good reminder - lots of people forget that their overdraft can be called in at anytime and get in a right mess. Our bank did that to us a few years ago on the business account - £30k pretty much overnight - so it's not something I forget!!

I'm glad it hasn't been catastrophic for you!!

I'm using mine at the moment as it's 'cheap' money - but I can pay it back within a fortnight if I need to at anytime.

chipping

I am actually pleased because rather than throw me into utter panic and hysteria which it would have dine 6 months ago, it makes no difference to me and thats a really nice feeling. Hopefully we can continue to use it less so that next time the bank reduce it it still won't matter. Though if they decided to withdraw it entirely within the next year that would be another matter.

maristella I'm with santander

They can do the same with a mortgage and that is really nasty but not widely publicised. I do know of one person that had this happen to and they had to very quickly borrow and beg for another mortgage elsewhere.

I think they will probably continue to reduce it as you 'pay it down' - which, as you say, is no bad thing, so I would be careful not to let it go down quicker than you can afford it to, just in case. -

Ivy - are you sure? Is this a general thing? I am pretty sure they can only withdraw mine for non payment etc not on a whim.

This happened to my Aunt, she had an overdraft of £250 which may not sound a lot but she was on a pension.

When they "reviewed" the overdraft they automatically took it off her. It meant she couldn't pay her rent.

The problem with her was she had had the £250 overdraft for a long time and had never made any attempt to pay it back. This forced her to negotiate repayment with the bank. They reinstated the overdraft but on the understanding that she would pay it back at £10 a month IIRC.

I've had my overdraft halved because I never use it. I always like to know it is there though just in case.

Santander took mine away at Xmas after a review of my account. We had moved and although they had my new details the 28 day notice letter went to my old address so the first I knew was when I checkd my online banking and it had disappeared. I know you shouldn't rely on an overdraaft facility but when you are a lone parent who rarely gets child support on time and unexpected bills always seem to come in when you least expect them having that facility to fall back on can be a great help. I have had my account for many years with the overdraft and my money in per month hadn't changed so it was totally unexpected.

Wow I didn't know banks could do that. I will tell DH as he sometimes goes overdrawn (we swapped roles and haven't quite got the finances balanced yet!)

It's weird that they can do that but you can opt out of extra credit limit - my bank increased mine several times as I usually pay it in full, but each time I got a letter saying I could cancel the increase (sometimes I did)

Is it to with not encouraging people to borrow too much? I can understand that but to just take it away seems wrong.

Make sure you talk to your bank. It is the best thing you can do and they will help. I had my OD removed last week, rang up yesterday and they reinstated it, under the agreement that they would reduce it by £30 a month. I am happy with this.

DW had a £1000 overdraft facility dating back to her profligate singleton days but after years of not using it the Bank (rightly) reduced it to £100. Quite right in a way because she seldom uses that account and if someone had decided to defraud it, £1000 is a much, much greater amount than £100

I had a £2000 overdraft until January this year. I returned from maternity leave, got my first full pay for over a year and Nationwide promptly reduced my overdraft to £1200 overnight. With no notice. It really felt like they'd stolen £800 of my wages from me!

I obviously rang them up and they said the letter must have gone missing. They reinstated the overdraft and put me on a repayment plan to reduce it to £1200 over three months. I finish this plan at the beginning of May and it's been a frugal 3 months I can tell you :o

Funnily enough I asked for my overdraft to be reduced £100 every month and our bank refused to do it like that. It is much easier to lose £100 per month than having to save up the full amount....

gazzalw, don't assume that reducing the overdraft limit is any protection from fraud, I had a £250 overdraft when a replacement card was intercepted. Natwest authorised 2 payments before sending me a letter saying I was over £2000 overdrawn. I was fuming as the letter told me I'd broken the terms of our agreement, when they shoul never have authorised it even if it wasn't fraudulent, but they wanted to hit me with a load of bank charges .

Not only your overdraft, and extremely rarely, your mortgage, but also credit card companies can call in the debt or reduce your credit amount whenever they like.

Oh yes I am sure they can withdraw mortgage and not having done anything wrong either the bank can call in there debt yes it had been rare but it does happen

ivy - that is absolutely not true for residential mortgages (ie a mortgage to buy the home you live in). There are very strict safeguards for homeowners in residence provided by the FSA. I know this as I work for a mortgage lender. There is absolutely no way that your mortgage can be called in if you are sticking to the terms of your mortgage contract - ie paying the full monthly instalments on time and not subletting without permission. Getting possession of a house is a very long drawn out process for a mortgage lender even if a borrower has completely stopped making any payments and there is NO WAY a possession order would be given by a judge if the contract terms are being met!

Commercial mortgages, however, are a completely different matter. These are mortgages you would take out to buy a property to rent out. These are not regulated by the FSA and the mortgage lender can take possession of the property at any time with no need for a court order.

I don't know what your friend's circumstances were, ivy, but there must have been more to it than they told you. Or was it a buy to let property. A mortgage lender absolutely cannot call in your mortgage like that if you are sticking to the terms of your contract.

I just wanted to clear that up as you must have scared the bejesus out of a lot of people here!

Ok carrots but it did happen, there wasn't a problem with paying and they got another mortgage pretty quick - so another lender didn't see them as a problem, which seems a little strange if they where not paying and they continued to live in the house, as it was a family home.

What you are talking about is repossession though where someone can't pay - but this was the bank for closing on the mortgage and wanted their money back - so they had to get another mortgage as they didn't have the money themselves to pay it off.

How long/what year have the rules you state applied from?

ivy - so if your friend had said, no i can't pay you back, what could they have done about it? Couldn't take any court action as would be laughed out of court.

Was this a long time ago? The rules I mentioned have applied all the time tha FSA have been regulating residential morgages as far as i know, not sue how long but a few years now.

Not saying it didn't happen but definitely shouldn't have and if a lender tried to do this now they could risk being shut down by the FSA.

my credit card which i had used for over 10 years was frozen a few years ago - no explanation

i have now to pay off the balance (quite a lot but within my limit) a bit each month and can't use the card anymore

carrots - they got another mortgage from another lender and paid the money to the first lender - so I have not idea what would have happened in your scenario, as that wasn't the outcome fortunately.

Also, even if you have an arranged/agreed overdraft you can now be fined for using it.

We've had an agreed overdraft facility of £3000 on our account for over 20 years with Lloyds TSB, from when it was Lloyds. They now fine you £5 for using it if the account doesn't go back into credit the same day, as well as charging you interest.

Bastards

If you have a loan and are behind in the payments, they can take money out of any of your other accounts to cover the shortfall IIRC.

tb that's just the overdraft usage fee. They give you the overdraft and if you use it you are charged £5 per month (plus the interest). It's explained in the terms and conditions