Credit where it’s due...as Barclays cancels your debt
Ms J. C. writes: I have been informed by Barclays that I am liable for an overdraft charge on a joint account I hold with my estranged husband, who entered i nto an Individual Voluntary Arrangement (IVA) with his creditors in March. We have been separated for eight years and none of the debt is actually mine. I do realise t hat l egally, as j oint account holder, I am responsible for his debt, and I will reluctantly pay the bank. However, I was very distressed to be told by Barclays that my own credit record will be affected for the next six years.
IT IS not very often that I can congratulate a bank for behaving humanely and sensitively, rather than insisting on applying the letter of law, particularly when the law is on its side.
You have made clear that you do understand that having a joint account with someone makes you responsible for the whole of any debt or overdraft if things go wrong. The bank is legally entitled to pursue either of the account holders, even if they were not the individual who put the account into debt.
You and your husband separated eight years ago, and you have not used the joint account since then. The debit card you held expired in 2014 and it was not renewed.
You opened your own account with Barclays, which you have used ever since and which you still have today. It was only recently, when your former partner ran up an overdraft of almost £1,000, that the bank contacted you, wanting to close the account and claim its money from you.
When you asked Barclays to reconsider, it was sympathetic enough to deduct £180 in charges, but that still left nearly £800 to pay. And the bank explained: ‘The account closure will also lead to a default reporting on your credit file, which will remain for six years.’
The reason for this is that all banks and credit providers that make use of credit agency records are obliged to report problem debts, even if they are later repaid. This is how the system works. In a nutshell, you did not run up the overdraft, you offered to repay it, but if a problem overdraft exists with your name on it, then Barclays must report it.
This is the legal background, but the unfairness was clear as well, so I asked officials at the bank’s head office to look into what you told me.
Their solution is remarkable. The only way they can avoid having to report the debt in your name is to remove you from the account, and so from the debt itself. And this is what Barclays is doing. You no longer owe a penny to the bank, so the bank has nothing to report about you to credit agencies.
A Barclays spokesperson told me: ‘ Now that we are aware that our customer has not accessed t he account for a number of years, and was unaware of the growing debt, we have taken action to remove her from the account and also the liability for the debt.’
So, well done Barclays. But your circumstances are unusual. Because you opened your own account with Barclays, the bank has evidence in its own files that you gave a new address, that you stopped using the joint account debit card, and that you received no statements on the joint account so had no idea the overdraft existed.
Nobody else should rely on this as setting a precedent. The golden rule is still that if you split up with your partner and have a joint account, tell the bank at once.
Do not risk being chased years later for someone else’s debts.