Help! - My bank has taken my wages

The Right to Offset -  Why you should avoid debts with your bank.

If you have loans with your bank, they can take money from your current account to make contractual payments towards those loans, whether you can afford it or not. This is called The Right to Offset. To add insult to injury, they also have the right to hit you with bank charges if payment (to themselves) is declined as if bursts your overdraft.

The Solution - Get a New Bank Account

If this is happening to you, you must get fresh backing facilities. Your next problem is maybe your credit rating is preventing this, if so; look to open a basic bank account.

Basic Bank Accounts

By law, all banks must offer a basic bank account, which allows for most banking facilities without the ability for you to get into debt. We advise you open a basic bank account (rather than a current account) for 2 reasons:

The FSA (Financial Services Authority) maintain a useful fact sheet which describes the basic accounts offered by all the major banks and building societies.

• You can't get further into debt if there are no credit facilities.
• A bad credit rating will not be a barrier to opening a basic account. You can open such an account without a credit check. The credit reference agencies may be contacted to assist in confirming your identity, but your credit worthiness is not an issue.

Basic bank accounts usually come with a cash/debit card and allow the account holder to pay bills by direct debt and standing order. Some come with full online facilities and cheque books. Banks view a bank account as just one of many products they offer to make money. When you go into debt, they make money. Therefore, banks are never keen to push basic accounts. Often you have to specifically ask for one. By law, they must offer such an account, but are under no obligation to promote it.

The FSA (Financial Services Authority) maintain a useful fact sheet which describes the basic accounts offered by all the major banks and building societies. see Basic Bank account information.

IVAs and Financial Management Plans

If you owe money to the bank your wages are paid, an agency such as ourselves are not able to negotiate reduced repayments. If one creditor has the power to take whatever is due to them, regardless of the client's ability to pay, then that puts them at an advantage over the others. A rule governing debt management and IVA is that all creditors must be treated equally.

Therefore when entering an IVA or financial management plan, and one of your creditors is your bank, it is essential you open a new bank account as a safe haven for your money. This puts you back in control. When you do this, your overdraft with your old bank can be treated as a creditor on your financial management plan or IVA.