Does a bank have a duty of care ?

[tallchap]

Briefly, I have a relative who has a current account overdraft (with a high street bank), which has he has paid a set fixed amount each month £75. The balance has minutely decreased over the past 5 years, with much of the £75 paying over the overdraft interest at 20%. He has never used the account in 6 years, just had regular £75 pcm being paid in, so the balance has reduced from around £5,000 to £4,000.

 

He has never been contacted by the bank in those 6 years to suggest he transfer that overdraft to a loan. It would seem the bank are very happy with him plugging in a way with the set amount.

 

They have never, once called or written suggesting an alternative ie loan, or increase the amount each month by a small amount.

 

A little whiz on a loan calculator says that the £5K would have been paid off, if he increased his payments to £119 in the 6 years even at the high 20% apr. If a loan of say 7% apr was applied the payments would reduce to £84pcm and still be cleared in the 6 years !!!! At present he still owes £4K.

 

Does the bank have any responsibility, duty of care to advise him, or at least contact him in that 6 year period ? Or is it 100% down to him ? Any ways forward here ?

 

Thanks for reading this.

[Guest liamgee]

I am surprised that at an interest rate of 20% he managed to reduced the balance at all with £75 a month payments. Have you considered the unenforcability route?

 

As regard duty of care its probably more pertinant to examine how the £5,000 overdraft was given (i.e. was it mis-sold etc).

[tallchap]

Thanks liamgee, what is the unenforceable route ?

 

Plus anyone else have a view on the duty of care ??

[buzby]

There is a duty of care on BOTH sides. Just because something is disadvantageous does not automatically mean that the service supplier (bank) has to advise or indeed do anything. This is well documented when old high interest savings accounts change to offer next to nothing, and the onus remains with hte account holder to notice and make alternative arrangements.

[tallchap]

Thanks Buzby, I see your thinking and I accept the point.

 

Is there any best way of him asking the bank to review its position of having taken vitually 6 years worth of interest whilst making hardly any dent in the original borrowing. He's been a stupid, but I can't help feeling that had anyone at the bank contacted him, phone or letter, and said look here if you do this that and the other, the debt would have disappeared by now.

[yourbank]

I would say as well, with income of only £75 a month that the loan would probably fail because the account is being serviced with a small amount of money each month. Internal credit scoring alone would decline it, IMHO.

[buzby]

By all means, if you don't ask you don't get - trhere's no guarantee that they'll look at it as sympathetically as they may have done in the past, but providing you don't storm in indignantly it might pay dividends....

[caro]

Briefly, I have a relative who has a current account overdraft (with a high street bank), which has he has paid a set fixed amount each month £75. The balance has minutely decreased over the past 5 years, with much of the £75 paying over the overdraft interest at 20%. He has never used the account in 6 years, just had regular £75 pcm being paid in, so the balance has reduced from around £5,000 to £4,000.

 

He has never been contacted by the bank in those 6 years to suggest he transfer that overdraft to a loan. It would seem the bank are very happy with him plugging in a way with the set amount.

 

They have never, once called or written suggesting an alternative ie loan, or increase the amount each month by a small amount.

 

A little whiz on a loan calculator says that the £5K would have been paid off, if he increased his payments to £119 in the 6 years even at the high 20% apr. If a loan of say 7% apr was applied the payments would reduce to £84pcm and still be cleared in the 6 years !!!! At present he still owes £4K.

 

Does the bank have any responsibility, duty of care to advise him, or at least contact him in that 6 year period ? Or is it 100% down to him ? Any ways forward here ?

 

Thanks for reading this.

 

I would suggest it would be worth your relative sending a SAR (unless they already have their statements), to establish if there were any charges on the account. If so, with interest at 20% over this length of time I think there's a good chance that much, if not all the overdraft would be wiped out.

 

I see no sense in looking into enforceability as there wouldn't be a credit agreement for an overdraft.