Can Banks Take Your Money To Pay Off Debts? StepChange (2024)

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 circumstances 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.

Worried about debts?

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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
Can Banks Take Your Money To Pay Off Debts? StepChange (2024)

FAQs

Can Banks Take Your Money To Pay Off Debts? StepChange? ›

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'.

Can banks take your money to pay off debts? ›

Generally, a bank may take money from your deposit account to make a payment on a separate debt that you owe to the bank, such as a car loan, if you are not paying that loan on time and the terms of your contract(s) with the bank allow it. This is called the right of offset.

What happens if you don't pay Stepchange? ›

If you've missed or struggled to make several payments, missing another payment can put your plan at risk. This may be a sign that you need a budget review, to make sure your plan is right for you and that it's sustainable.

Can a debt collector take money from my bank account? ›

Debt collectors, though persistent, cannot simply withdraw money from your account without a court-ordered bank levy, which is typically a last resort. The FDCPA provides protections for consumers, with avenues for recourse if these are violated.

Can banks take your money without permission? ›

To be clear, a bank won't withdraw funds without your permission for any other purpose than to cover outstanding debts. Take a look at your deposit agreement to see if your bank has a right to offset and don't hesitate to report any unauthorized withdrawals, as it could be a sign of fraud.

Can a bank refuse to give you your money? ›

Yes. Your bank may hold the funds according to its funds availability policy. Or it may have placed an exception hold on the deposit.

Can banks confiscate your money? ›

However, if you owe money to the bank, they can take legal action to recover the debt. This can include filing a lawsuit against you, obtaining a judgment, and garnishing your wages or bank account. In such cases, the bank can freeze your account and seize funds to satisfy the decision.

Is StepChange a good idea? ›

"Stepchange helped me a lot... every month I used to stress because I knew I would have nothing left over to my name. Now I only give the amount I can really afford to my creditors. BIG THANKS TO STEPCHANGE."

What happens if you can't pay step pay? ›

If you miss a repayment, a $10 late fee may apply, and you won't be able to spend with StepPay until you have enough available funds in your repayment account.

How many StepChange payments can I miss? ›

StepChange does not cancel plans for one missed payment, especially when circumstances are outside your control, but other providers may. However, we may have to cancel a DMP if there are multiple missed payments. Are you a StepChange client? Log in to OnlineDMP to manage and update your plan.

What type of bank account cannot be garnished? ›

Certain types of income cannot be garnished or frozen in a bank account. Foremost among these are federal and state benefits, such as Social Security payments. Not only is a creditor forbidden from taking this money through garnishment, but, after it has been deposited in an account, a creditor cannot freeze it.

How can I protect my bank account from debt collectors? ›

There are four ways to open a bank account that no creditor can touch: (1) use an exempt bank account, (2) establish a bank account in a state that prohibits garnishments, (3) open an offshore bank account, or (4) maintain a wage or government benefits account.

Which states prohibit bank garnishment? ›

What States Prohibit Bank Garnishment? Bank garnishment is legal in all 50 states. However, four states prohibit wage garnishment for consumer debts. According to Debt.org, those states are Texas, South Carolina, Pennsylvania, and North Carolina.

What law allows banks to take your money? ›

The specific section of Dodd-Frank that deals with bail-ins is Title II: Orderly Liquidation Authority (OLA). To prevent mass bailouts in the future, OLA: Restricts some of the riskier activities banks have engaged in previously.

Can a bank close your account and take your money? ›

What happens to your money if a bank closes your account? If you have money in the account at the time it's closed, the bank is required to return it to you minus any outstanding fees. If an automatic deposit goes into that account after it's closed, those funds must also be returned.

Is it true that banks can take your money? ›

It is rare, but any money paid into your accounts can be taken if you are behind on: Loans payments. Credit cards payments. Overdrafts.

Can a bank take your money for inactivity? ›

Generally, an abandoned account is one for which there has been no customer-initiated activity or contact for a period of three to five years. States' abandoned-property programs require banks to turn over the funds of such bank accounts to the custody of the state treasurer.

What happens if you don't pay your debt to the bank? ›

In a Nutshell

If you don't pay a debt, it can be sent to collections. If you continue not to pay, you'll hurt your credit score and you risk losing your property or having your wages or bank account garnished.

When can a bank take money from your checking account without your permission? ›

Yes, contrary to what you might think, a bank can take money out of your checking account, even if you don't authorize it. It's called a "right to offset" and it typically happens in one situation: When you owe your bank money on a loan.

Can debt companies take money from your bank account? ›

This is called a third party debt order. A third party debt order allows your creditor to take the money you owe them directly from whoever has the money. Usually it is your bank or building society that is holding your money for you.

References

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