Monday 30th of November 2009
Current account holders have revealed in a new survey by Which? that rather than banks allowing them to go into the red, they would rather have unauthorised payments blocked, an industry move which could support individual voluntary arrangement (IVA) efforts.
When trying to repay their unsecured debt through an IVA, the last thing people may want is to find that they have extra bank charges to deal with because certain transactions have tipped their accounts out of the black and into the red.
Almost half of current account holders have told Which? that they would prefer unauthorised overdraft payments to be blocked, with those aged between 16 and 24 the most in favour of this move.
Making repayments under an IVA means that interest rates on debt such as credit cards and personal loans are frozen. But when every penny counts, having to fork out over £30 per unauthorised transaction could set debtors back and put them at risk from breaking their IVA agreement.
Under an IVA, cash-strapped consumers can keep hold of their home and avoid court proceedings if they successfully keep up with their monthly repayments. But should they break this deal, creditors can pursue legal action in court.
Phil Jones, Which? personal finance campaigner, said: "Many current account holders are effectively being lent money that they haven’t asked for and being charged through the nose for it.
"Such an expensive ’service’ shouldn’t be forced on people who don’t want it as it can easily lead to financial difficulty."
Financial difficulties could be solved with an IVA, which can merge a number of unsecured financial commitments into one more manageable monthly repayment. This could be ideal for those Britons with debts of more than £15,000.
People may want to try and keep repayments in their allowed overdraft to avoid IVA repayments going off course because of unexpected charges and fees.
By Rachel Powell
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- An IVA could lessen the shock of a pay freeze
