How far over an overdraft can you go?

[flamencia]

It's not me, but someone I know, who is seriously overdrawn. At least £3k overdrawn, it's an unauthorised overdraft so accruing fees each month too. They have been going more and more overdrawn each month, from only £200 in May to this £3k+ now.

I don't understand how this is happening. Surely at some point, the bank (HSBC) would be refusing their transactions? There must be some point where the bank will not give more money at the ATM and will start refusing direct debits etc? I would have thought this point would come long before £3k.

It's an adult, not a vulnerable one, so I can't step in and do anything but I'm worried about how far it will go before it hits the crisis point of all transactions being refused.

HSBC are usually on the ball with stopping spending that goes over an overdraft - in particular, Direct Debits and Standing Orders would be declined if there was a lack of available balance .

HSBC's system is set so that DD's and SO's are automatically returned - there's no way for them to debit without funds there, unless the account holder is rich enough to have a personal Relationship Manager, which your average Joe wouldn't get anywhere near. So there's something amiss here - either this persons agreed overdraft is higher than they think or their SODDS WILL be getting returned.

Tell your friend to write a letter of complaint confirming they are in financial difficulty and that considering their situation they find the total amount of fees charged of £X in X months unfairly punitive (sp) and they would appreciate a refund as a gesture of goodwill. If not they will go to the Financial Ombudsman. Avoid specific phrases such as 'unfair fees' or blanket demand for X years worth back - if you go down that road nowadays, you'll get a templated NO letter back.

Each time the direct debits/standing orders are returned there will be a charge. Not all stores pre-authorise a transaction with the bank (depending on it's amount) and those debit card transactions cant be returned. It will be the charges that keep the account overdrawn which then leads to new charges

Perhaps if your friend has a track record of being able to pay the charges, then the bank is quite happy to carry on allowing their customer to be unauthorised overdrawn so they can rip your friend off

The bank charges a maximum of £80 a month in fees so that's not accounting for the overdraft having gone up to £3k in 3 or 4 months. The payments definitely are being honoured, because I know, for eg, that the mortgage payment is being made. I've seen the mortgage statement and it's definitely being paid, from that account. The utility bills are up to date and are also definitely being paid out of that account (I've seen the online accounts for them). Added to that, they are still using their card in shops and it's not being declined, I have been present on many occasions and seen for myself.

I know it's an unauthorised overdraft because there was a letter sent out around the £2k mark, informing them that it was unauthorised and fees were bring charged at the max of £80 per month.

I would have thought the same as you have said, had I not seen all the evidence for myself. I'm really astounded that it's been left to get to this state and the card isn't being rejected or swallowed by the cash point.

There's money being paid into the account each month, around £2k, but obviously that's not enough, so the account is going less overdrawn, then creeping back up as the month goes on and payments go out.

I'm just trying to make sense of what is going on before asking them directly.

Angel, that wouldn't surprise me, awful as it is. I don't think it's ever been this bad before though and surely the bank must have some breaking point.

If there's £2k going into the account a month, then that shows they are able to afford it, even if they cannot manage it. If that £2k stopped going in, I am sure the bank will not allow anything to be paid out of the account, and they wil demand repayment of the overdraft sharpish.

banks are bastards.

they only stopped my OD when i finally admitted defeat ad got an IVA. then they were quick enough to start with letters demanding payment despite being happy enough weeks before to give me unauthorised credit while charging the earth,

Have they actually spoken to the bank (and stopped spending what they don't have)?

I don't think they've spoken to the bank. But, even with £2k wages going in, they're overspending by about £800 a month so the bank can't surely authorise this indefinitely?

It is really shitty of the bank, you'd think there would be some kind of limit on overspending like this. Not having really had much unauthorised debt myself, I'm just shocked at how easy it is to have it mount up.

Flamencia HSBC will NOT, under any circumstances, pay SODDs that take an account vastly overdrawn.

It simply can't happen. There is a point blank, automatic cut off, which will bounce SODDS if there are not enough funds available - introduced over the last few months. It used to be open to discussion, whether items were paid or returned - no more.

What may be happening is that the £2k credit going in is putting the account in the green and the SODDs are being paid from available balance. Then it may creep overdrawn again due to contactless card payments and the previous months charges and debit interest. Once it goes over the agreed overdraft limit, £5 a day fees are charged. Maximum of £80 a month.

If there is 'only' £2k credit going in a month and the balance is £3k overdrawn now but DD's have been paid, there must be an overdraft of something...you can still go into an unauthorised overdraft when you have an agreed limit, if you go over it and this would also generate letters saying that (for instance) 'your balance is currently £2500 overdrawn and as this amount is unauthorised will generate fees of £80 per month'. It doesn't mean that the whole owed balance is unauthorised overdraft.

The account holder needs to take some responsibility too as they must still be overspending despite having no money. They also need to speak to the bank

Flanders, but hsbc is. The account was over £2k overdrawn last month. Then the pay went in, but only brought it down to about £800 overdrawn. Payments have still been made. Mortgage, gas electricity all paid. The monthly pay is not bringing it back into the black, but these payments are still being honoured. There is an authorised overdraft of £200 but it's still not enough to be classed as okay to take DDs from.

Demented, the account holder needs to take full responsibility, no argument there, I'm not suggesting they are in any way blameless. I am completely baffled as to how their bank hasn't just blocked everything. I'm with a different bank and they started hassling me as soon as I went a hundred over my limit years and years ago, card got refused almost immediately. Which I think is how it should be, the bank shouldn't be expected to hand money over endlessly.

Are you certain there isn't an arranged overdraft?
Ours is 5k because we've never changed it from when we moved( arranged the overdraft to pay fees etc )

I think the authorised OD must be higher than £200. How sure are you of that fact?

The arranged overdraft must be more than £200 or the payments would get returned unpaid. The wages must take her within the overdraft limit so the payments are made and then she is overdrawn again and gets charged.

The last I was told was that the overdraft facility had been closed. I've seen recent bank statements which state that the unauthorised overdraft is £200. So the likely scenario is that the authorised overdraft has been extended recently. Which doesn't help with the chronic overspending issue but at least it would explain the fact that the dds are being paid. And crisis point is going to come when the overdraft is so far over limit that it doesn't go back under when their pay goes in.

Thanks everyone.

your friend needs to contact a debt advisory agency quick smart id say. i was with hsbc and my agreed od was 2k but i was regularly going well over that just to try and make ends meet - that said id rather my DDs and rent were honoured even though it was costing me.

in the end i just couldnt ignore it any longer and the fees the bank were charging were eyewatering.