Banks and building societies can take money from your current account to cover missed payments on other accounts you have with them. This is called the 'right of set off'.
It can also be called:
- The 'right of offset'
- 'Combination of accounts'
Should I take money out of my bank if I have debts with them?
It is rare, but any money paid into your accounts can be taken if you are behind on:
- Loans payments
- Credit cards payments
- Overdrafts
To avoid this, you should:
- Talk to your bank
- Tell them you are struggling to pay
Get free debt advice if you are worried about a bank taking money from you.
The bank may offer to:
- Separate any overdraft from your existing account
- Set up a new 'clean' basic bank account for you
- Help you to keep banking with them while you pay off debts
Set up a new basic bank account with a new bank if:
- Your bank is not able to help, or
- You would prefer not to stay with them
Can banks take your money without your permission?
A bank cannot use right of offset to take money from your account without your permission unless:
- The current account and debt are both in your name
- This gets complicated with joint debts and joint accounts
- The current account and debt are both with the same lender
- A bank cannot take money from your account for a debt with a different company
- The debt is in arrears
- They cannot use right of set-off to take money if repayments are up to date
- They warn you clearly in advance
- They say they might use right of set-off if you do not contact them or pay your arrears
- They take your circ*mstances into account
- And do not see that taking the money would cause you hardship
It is rare for banks to use right of set-off. They must explain how you can avoid it happening again.
If your bank contacts you to say they may use right of set-off, this is a sign that:
- You are in financial difficulties
- You should get advice
We can help you.
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When can right of offset be used with joint accounts?
When it comes to joint bank accounts or joint debts, right of set-off can be used to transfer money:
- From your sole bank account to debt only in your name
- From your sole bank account to a debt you have jointly
- From your joint bank account to a joint debt, if the same two people are named
Right of set-off cannot be used to transfer money:
- From your joint account to a sole debt in your name
- From your joint account to another joint account you have with a different person
Some banks say in their terms that money can be transferred between any accounts in your name.
This is likely to be considered an unfair term.
Make a complaint if the bank takes money from a joint account for a sole debt.
How can I avoid money being taken from my bank account?
If you fall behind with any debts:
- Contact your bank
- Tell them you are having financial difficulties
- Ask what help they can offer you
Think about switching your account if your bank cannot help.
- They should give you four to six weeks to deal with your situation once you talk to them
- This gives you enough time to:
- Set up a new account
- Arrange to have your wages or benefits paid into it
You can use your ‘first right of appropriation’ to prevent the bank taking your income if you live in:
- England or
- Wales
This means:
- Write to your bank before money is paid in
- Use our example letter
- List or ‘earmark’ what the money is going to be used for (like rent or food)
They should always leave you with enough money for essential bills.
Your bank cannot use right of set-off if you show them the money is earmarked for essential living costs or priority bills.
What can I do if right of set-off has already been used?
Contact your bank straight away if they take money.
Ask them to refund some or all of it if:
- You do not have enough to cover bills and living costs
- You cannot pay priority debts
Make a complaint if they do not do this.
I am worried about my bank using right of offset, what can I do?
Losing money through right of set-off is a warning sign.
Take two minutes to answer a few simple questions or contact us for advice.
Related articles
- Can a creditor sell my debts to a debt collector?
- Default notices and missed payments
- What debts to pay first
- Sample letters to creditors
