Out­stand­ing loan?

CityPress - - Business -

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.

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