Bank 'dipping into client funds'
Lender admits taking savings-account cash to cover arrears
BANKS have been accused of acting in a high-handed manner after it emerged that they are dipping into consumers' savings accounts when the consumer does not pay a loan.
Known as offsetting, it is apparently legal for lenders to dip into a savings accounts when a repayment has not been made on a credit card account, loan or mortgage, it emerged yesterday.
This is done without the customer's prior notice.
The Irish Independent has seen correspondence from a leading bank, where it admitted it took money from a customer's savings account after payments were missed on a personal loan.
The documents show the code SBT beside the details of the internal bank money transfer, which stands for special bank transfer.
Last night, a leading consumers' group condemned the practice as morally and legally questionable.
James Doorley, chairman of the Consumers' Association of Ireland, called for the "offsetting" practice to stop. "This is high-handed and raises questions from a legal and moral point of view," he said.
Mr Doorley, who is also a member of a consumer committee that advises the Financial Regulator, called for a ban to be placed on banks taking money out of people's savings to meet loan or credit card repayments.
The practice of banks shifting money between accounts without consumer consent was highlighted by a director of the Irish Mortgage Corporation, Frank Conway.
Mr Conway explained: "Offsetting is the process where a creditor can take funds from a client account to force the payment of a debt a client has with the institution."
Mr Conway, whose firm launched debt advice company Credycare recently, said offsetting can have disastrous consequences for consumers affected by it.
This is because money that customers are keeping aside to meet a credit card or moneylender debt is taken from them without their will, forcing them into arrears.
He added that banks that dip into accounts to pay loans or mortgages often then follow this up by telling the customer to close their current account.
AIB admitted yesterday that, on occasion, it would take money from one customer account without being told to do so. But it said that it acted strictly within the law.
Ulster Bank denied dipping into savings accounts when mortgage payments were missed but admitted it did tell customers it was closing their current accounts. But it stressed that it gave customers 60 days' notice in writing when it did this.
A spokesman for the Irish Banking Federation defended the practice of banks using a customer's savings to ensure they do not put their home at risk. He stressed that it should be a priority for all borrowers to meet their mortgage repayments before other payments.
The spokesman advised anyone who was in arrears on their mortgage to complete a full statement listing their income and assets and all their outgoings and to present this to their mortgage lender.
Bank of Ireland denied it transferred money from one account of a customer to another without first getting the customer's permission.