This FAQ is about what you can do if your bank is levying charges against you leaving you without enough money to house yourself, feed yourself, keep yourself warm or to go to work.
Q. Did you say go to work? I thought that you could only protect benefits payments or tax credits from the bank.
A. It seems that any money which is needed to subsist can be protected from your bank. Your bank probably knows this but of course they won’t have told you. More about this below.
Q. So how can I protect myself from my bank taking the basic money which I need to survive?
A. You will need to “appropriate” the money which is coming into your account to your subsistence needs. You do this by sending your bank a formal “letter of appropriation”.
Q. What is “appropriation” and what is a “letter of appropriation”?
A. For these purposes we can say that “appropriating” your money to your subsistence needs means that you are reserving either some of your money – or maybe all of your money for certain expenses which are essential for you to continue living. A Letter of Appropriation is the way that you inform your bank that you are reserving your money in this way.
Q. But what if the bank says that I owe them bank charges?
A. By appropriating money (or reserving it) you have in effect established a priority for your money. The bank has to take second place in trying to get its charges.
Q. Is my bank really going to take notice of a letter from me and agree not to take their charges?
A. The banks are required by law to respect money which is appropriated to subsistence expenses.
Q. I asked my bank about this and they say that it is rubbish and that I must pay my bank charges.
A. This is not surprising. Bank Staff are almost always very poorly trained and very poorly qualified. Whatever training is given to bank staff, you can be certain that teaching them about customers’ rights – and about Appropriation – is not going to be very high on their list of Important-Things-A-Bank-Employee-Should-Know. Luckily for the banks, the Consumer Action Group is here to help supplement their staff-development programme.
Q. Does Appropriation apply only to benefits or tax credits?
A. No. The Doctrine of Appropriation applies to all money which you reserve for some other use. In terms of your bank account and taking priority over bank charges, we are only concerned with subsistence money. However, it doesn’t matter how the money comes to you.
Q. In what circumstances might I use the Doctrine of Appropriation?
A. You may be on benefits or tax credits – but it also means that you might be working but only receiving a minimum wage or else you might only be working part-time. Your normal income level might depend on overtime, but if you have become ill or have had an accident which means that your income is reduced, then you might need to consider protecting your living expenses by sending your bank a Letter of Appropriation.
Q. So what kinds of expenses can I prioritise over my bank’s over their own charges?
A. Anything which is essential. This includes, food, heat, light, rent, essential clothing expenses, mortgage.
Q. Mortgage???
A. Yes, mortgage. Of course if you own a property, then there is nothing to stop your bank trying to register a charge on your property and eventually to try and have it sold. But if you reserve money for your mortgage, the banks aren’t entitled to drive you into arrears and eventually homeless just to satisfy their own bank charges regime.
Q. I have a loan with the same bank. Can I appropriate money so that they can’t take out my loan payments each month?
A. You probably can’t. This is a debt which you have contracted to the same bank and it seems unlikely that you can force them to de-prioritise their own loan repayments.
Q. Is my bank just going to accept this every week or every month?
A. No. They probably won’t. However, the most they can do is to close your account and force you to make banking arrangements elsewhere. We recommend that you get a parachute account – maybe more than one.
Q. So what do I do? Simply write my bank a letter telling them my next payment in has to be used for my expenses?
A. Well you could do but we don’t think that is the best way to go about it. A letter of Appropriation is a very serious matter for the bank. They aren’t going to like it. However, the bank has a duty to enter into proper dialogue with you and we think that it is only fair that you enter into proper dialogue with the bank. You should let them know exactly what the position is and where they stand. This is also in your best interests because of they then ignore your Letter or if they take retaliatory action against you, then you will be in a much better position to pursue some serious action against them. (We will help you do this.)
Q. So What do I do?
A. We think that an effective letter of appropriation should set out an income and expenditure schedule. You should set out your income circumstances – on benefits or on reduced wage etc – and give the reason for being in those circumstances. You should lay out your income and what you consider are your necessary outgoings. If there are other outgoings/direct debits which are not essential then you should cancel these. There is no sense in incurring additional bank charges. You should deal with the suppliers of non-necessary services directly.
Q. Do I have to send this Letter of Appropriation every week or before every income payment in?
A. That seems to be the common practice, but we don’t think that this is at all necessary. We think that your Letter of Appropriation should include an estimate of how long your circumstances are likely to remain unchanged. We think that you should inform the bank that on the basis of your attached income/expenditure schedule, you expect that your circumstances will remain unchanged for XX months and that you are therefore appropriating £xx amount of you income for the expenditure identified in your schedule for that period of time. We think however, that it would be reasonable if you were to provide your bank with an update of your schedule and of your Letter of Appropriation every 3 months. You should tell them in your letter that this is what you will be doing.
The idea is to behave so reasonably and so proactively that any judge will have not the slightest hesitation in finding in your favour in the event that your bank ignores you and that you then have to take action.
Q. Is the bank going to take my income/expenditure schedule at face value?
A. They should do but if they want to query any of it, then they are entitled to. However, they would have to begin by accepting it rather than begin by rejecting it.
Q. Suppose that some people hide some of their income.
A. Yes, this is always a danger. We can only say that anyone who did this would be undermining the credibility of everyone who is on reduced income. They would also be committing an offence under s.2 Theft Act 1978 – dishonestly avoiding a lawful debt. The Consumer Action Group would not want to be involved with anyone who was dishonest in their Letter of Appropriation.
Q. So do I just send the Letter to my Bank?
A. We think that you can do better than that. If things are tight, then you want to know that the bank has received your letter and that they are accepting it and that you are safe. We suggest that you make an appointment with your bank manager – or whoever it is at the bank that will see you. Give them your letter of appropriation into their hand. Explain it all to them. They will probably never have seen one before – or at least they will never have seen one as comprehensive as the one you will provide to them with our help. Tell them that you will be sending a copy of the Letter to them at their Branch and also that you will be sending a copy of the Letter to their Customer Service department. Be prepared for a frosty reception during this meeting. However, keep it polite. You are in the right and you have the upper hand. Also you are supported by the Consumer Action Group. The Bank staff aren’t supported by CAG. In fact they receive little enough support even from their own employers. Tell the person that you are meeting that you need a quick answer because this concerns payments going out in XXX days. You should be doing this at least 7 days before your next payment – and much longer if necessary.
Make sure that the bank staff-member appreciates that this letter or appropriation is valid for XX months/weeks.
During the meeting, make notes. After the meeting make further notes so that you have a full record of everything which was said.
You can tell the bank staff-member that you are taking advice from the Consumer Action Group on this.
Q. What do I do if the bank refuses or if they ignore my Letter of Appropriation.
A. Let us know. We will help you take legal action. If you react fast enough, then we would help you apply for an emergency injunction to enforce the Letter. We think that to ignore a Letter of Appropriation would at the very least be unfair treatment per re.5 UTCCR and also be in breach of the FSA new Banking Conduct regulations
Q. What happens if they close my account but a payment still goes in, maybe because I didn’t change the payment details in time?
A. The bank wouldn’t be allowed to keep the money – especially if they are aware that there is a Letter of Appropriation in place. It would be quite improper of them to receive the money – even if you are in debt to them. You would have the basis for a very serious complaint.
Q. Is there a template Letter of Appropriation?
A. There is one in our library. Here
Q. Is there an Income/Expenditure template?
A. Here is a link to one which will do perfectly
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written by BankFodder, March 05, 2010
If people want to challenge charges then they should do so directly. Anyone who thinks that they can use the argument that the charges are unlawful to justify the falsification of an income/expenditure schedule will hurt the interests of thousands of people who are genuinely in need.
We would not support anyone who does this.
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But i suppose charges are not a lawful debt which is what most people will try to stop their benefits going towards?