I ACALVIN WRITES:
was retrenched two years ago and fell behind on my credit card payments. My father transferred some money into my bank account to do renovations on his home and to help me register at school this trimester, but Standard Bank took an amount of R3 867 from this payment from my father to settle my credit card. Can the bank do that even though it is not my money?
CITY PRESS REPLIES:
ccording to Standard Bank, it has a “common law” right to make use of available funds in a customer’s account to reduce or settle the outstanding balance of another debt that is owed to the bank. The ombudsman for banking services says that prior to the implementation of the National Credit Act, which came into effect on June 1 2007, the banks included a clause when opening a bank account that allowed it to deduct funds for set-off.
This was no longer allowed under the act, and the banks no longer insert a set-off clause in any of their contracts and technically cannot debit an account for a loan repayment unless the customer has agreed beforehand.
However, banks and the National Credit Regulator are in dispute as to whether or not the act prohibits the application of the common law principle of set-off.
The current position is that banks continue to apply the common law principle of set-off on accounts entered into after June 1 2007, despite the provisions in the act.
At this stage, the ombudsman for banking services has requested that the banks apply the principle as fairly as possible.
“In instances of a customer’s salary, we have recommended that banks do not attach the customer’s entire salary. We have recommended to banks that they attach only a reasonable portion of a salary to enable the customer to still pay other ongoing debts. What a reasonable amount may be is, however, subject to debate, and each case depends on its own merits and facts.”
According to the ombud, there are only two cases where set-offs are not allowed, even under common law: if the source of funds is a pension fund; or if the debt applies to a school or student loan.
In this case, a credit card debt would not be exempt. However, in Calvin’s case, after City Press raised the issue, the bank refunded R3 000 and kept R867 to cover the outstanding payments.
It is also important to note that any money in your bank account is considered your property – even if you consider it to belong to someone else.
This is important if you are transferring money into someone else’s account. If that person owes the bank money, it may be attached.