Bank Force Unauthorised Overdraft

foggy_lad

Not sure if this should go in here or in Cunsumer issues, can a mod please move it if they feel it necessary.

I got a text alert earlier to say my account with Ulster Bank was overdrawn by €30 after a direct debit has been paid out by the bank. The problem I have with this is that I do not have any overdraft facility on my account and had at the time of applying for the account requested that I should not have any overdraft on the account under any such circumstances.

I thought the direct debit scheme required banks to refuse requests where thare was not enough funds to meet a debit and it was then up to the presenting bank to re-present it a few days or a week later? In my case my own bank have allowed this direct debit which has created an unauthorised overdraft on my account but this is all in their favour as it will incur charges.

Are banks allowed to put an overdraft on an account where the account holder has not requested one and when they are unaware their account will be overdrawn? I thought as a credit institution they could not sell any credit product such as an overdraft to me without me first giving permission for it?

3DataModem

By authorising the Direct Debit you have authorised UB to do this. Check your current account T+C. Same as if you wrote a cheque.

In any case, a bounced Direct Debit probably would cost you a lot more in charges than a unauthorised overdraft.

No bank will guarantee not to overdraw you... there are always circumstances where transactions can be authorised without funds.

dotsman

foggy_lad wrote: »

Not sure if this should go in here or in Cunsumer issues, can a mod please move it if they feel it necessary.

I got a text alert earlier to say my account with Ulster Bank was overdrawn by €30 after a direct debit has been paid out by the bank. The problem I have with this is that I do not have any overdraft facility on my account and had at the time of applying for the account requested that I should not have any overdraft on the account under any such circumstances.

I thought the direct debit scheme required banks to refuse requests where thare was not enough funds to meet a debit and it was then up to the presenting bank to re-present it a few days or a week later? In my case my own bank have allowed this direct debit which has created an unauthorised overdraft on my account but this is all in their favour as it will incur charges.

Are banks allowed to put an overdraft on an account where the account holder has not requested one and when they are unaware their account will be overdrawn? I thought as a credit institution they could not sell any credit product such as an overdraft to me without me first giving permission for it?

Check the terms and conditions of your current account. It will most likely specify both what the bank's/your rights/responsibilities are with regards going overdrawn.

Typically, all current accounts can go overdrawn - they have to be able to (due to direct debits/standing orders/offline debits/cheques). When you apply for an overdraft, you are actually applying for an authorised overdraft, and thus be exempt from certain penalties/surcharge interest up to a specified amount. However, a current account can always go into an unauthorised overdraft.

Ultimately, I would imagine that the terms and conditions cater for your scenario. After all, it is the customer who controls the account and not the bank. It is the customer who's responsible for maintaining their account in proper order.

It's typically a lose-lose situation for the bank. For every customer complaining that their bank allowed their account go slightly overdrawn to pay a direct debit/cheque etc, there's another complaining about the opposite and that the bank have cost them a lot of money/time/hassle over not honouring a cheque/dd etc even though it would have meant going overdrawn only a few euro.

nlgbbbblth

dotsman wrote: »

It's typically a lose-lose situation for the bank. For every customer complaining that their bank allowed their account go slightly overdrawn to pay a direct debit/cheque etc, there's another complaining about the opposite and that the bank have cost them a lot of money/time/hassle over not honouring a cheque/dd etc even though it would have meant going overdrawn only a few euro.

this.

A bank is damned when they bounce and are now castigated for doing you a favour.

Generally speaking the irregular account charge (charged when you exceed your limit or go overdrawn without one) is nearly three times less than the fee incurred for a bounced item.

unclebill98

If they did not pay it you would have been charged €12.70, still putting you maybe overdrawn. Instead they honoured it and charged you €4.44 for exceeded your limit.

chris85

As said its a lose lose for the bank. They always have this issue that they pay out or not pay out for DD's when funds not available.

to be honest if i was short a few euro for my phone bill or ESB i would be happy by bank paid it out rather than get charged more for it not going through and the hassle. thats only my point of view.

nlgbbbblth

Thread title is incorrect. The customer is responsible for running his own bank account. A direct debit is an agreement between the customer and the originator. The bank merely facilitates payment.

foggy_lad

Just to update, the bank didn't actually pay the debit And although my account apeared to be overdrawn it was not, and I have been charged the €12.70 for the returned direct debit:( my own fault entirely I know as I delayed in lodging funds to cover the debit.

I will be keeping a bit extra in this account in future to cover bills for 2 months so hopefully this wont happen again.

nlgbbbblth

One tip: always ensure you have cleared funds in your account the day before cheques and debits are due to be presented.

The days of being able to lodge on the day to cover items presented are gone - especially for personal customers.

foggy_lad

nlgbbbblth wrote: »

One tip: always ensure you have cleared funds in your account the day before cheques and debits are due to be presented.

The days of being able to lodge on the day to cover items presented are gone - especially for personal customers.

I was hoping I would be able to do that when I realised the funds were not there to clear the direct debit, no major issue though and lesson learned for me,

Thanks to all for the helpful advice especially about allowing the overdraft as it is cheaper then the fee for the unpaid debit.