Picture the scene – your wages or benefits are due to be paid into your bank account and you need the money to cover your bills.
BUT you owe the bank some money, and the bank wants to take some of your income to reduce your debt.
What can you do?
There is an answer! You can tell your bank how you want them to use your money when it’s paid into your account!
This is called your “first right of appropriation” and it allows you to control your money to pay priority debts, such as your rent or mortgage. It also helps you to stay in control of your money.
If you don’t do this, the bank can decide to use your money to reduce your debt by paying off overdrafts and bank charges or to make payments to payday loans etc.
These are non-priority debts and should be cleared only when your priorities have been met.
So how do you do it? Well…
- Check your account regularly and ring your bank if you know that you are going to have a problem.
- The bank need seven days notice to set up your first right to appropriation, so be prepared!
- Tell the bank you want to do this until further notice – otherwise you’ll have to write to them every week!
- Instruct the bank which standing orders or direct debits need to be paid first i.e. rent/mortgage and council tax.
- Keep a copy of the letter you use.
- If the bank refuses, complain to the bank manager and if they won’t help, then go to the Banking Ombudsman.
Remember that the standing orders and overdraft fees will still need to be paid, so you will build up more debt.
This is not a long term solution and if you need to do this, it is probably time to start thinking about opening a new account at another bank and starting with a “clean slate”.
You can use this letter as a template!
first right of appropriation