Overdrafts being cut by banks to cut credit
It has been revealed that many banks are cracking down on overdraft facilities and limits in a bid to try and reign in credit. Some banks are now conducting regular reviews on overdraft limits, and are giving consumes just one month in which to repay the money after slashing their overdraft limit.
Amongst the lenders that have cut overdraft limits for customers with just a month’s notice are Lloyds TSB, Halifax, and Nationwide. The British Banker’s Association has said that there is no obligation for lenders to give notice, as an overdraft is essentially a loan that has to be repaid on demand.
One consumers received a letter from his bank stating that his overdraft was being reduced from £7000 to just £2000, and that he had just a month to repay the difference. He said: ‘I was very surprised to get the letter, as I had never gone over the limit. I recently bought a house and have used every penny I had and the overdraft to renovate it.’
‘If they had looked properly at the account, they would have seen the money went to the same building firm. I had two Isas and an e-Savings account with them I’d also cleared out to fund the work. The annoying thing was that I had just got into a position to start paying down the overdraft and saving again.’
His bank responded by stating: ‘Mr Dornan’s account was reviewed as part of a wider Nationwide policy to review customers’ FlexAccounts every six months. The overdraft limit was reduced because the credit score did not reach the required level to enable us to renew the facility.’
The customer was so angry that he closed his accounts with the bank and moved instead to the Internet arm of HSBC, First Direct.
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