Bank adds interest to overdrawn A/c

[Tessi]

Hi A friend of mine had a bank account with a dd set up on it approx 4yrs

ago. He also had a loan of 5,000. He left that town and move to a town

down south. He paid off the loan in full, cancelled the dd, and closed off

the account. This was done in a sister bank down south. That was the

end of that account as far as he was concerned. He closed the account

because he opened a joint account with his partner in another bank. He

thought no more about it until he got a letter about a two yrs ago, sent

to his old address (his parents home) to say he was over drawn by approx

€90. He wrote to the old bank asking for an explanation as to how he

could possibly owe money when the account was closed. After several

letters he finally got to the bottom of it. The old bank said a request for a

dd was debited from his account. He was paying interst on the

overdrawn dd amount plus the dd debit amount also. My friend wrote to

the bank explaining that he had paid all that was owing on the account

plus he had cancelled the dd and closed the account over two years

ago. He also gave the bank his new address for any correspondence and

told them he no longer lived at the old address. He again thought this

would be the end of the matter ontill he recently got a statement again

sent to his mothers home. This statement had an outstanding amount of

€137.56, which resulted from the interest charged.

Firstly he didn't have an overdraft set up on his original account. The

bank should not have accepted an overdraf if the funds weren't in the

account. The bank seems to be totally ignoring the fact that he said he

had cancelled the dd, closed the account and moved address. He would

not be receiving the mail except the fact his mother passes on his mail.

What should he do: pay up and close the account again even though he

really doesn't have any available money since becoming unemployed. Or

does he have any rights to fight this. He doesn't want to ruin his credit

rating. He didn't keep any documents relating to closing the account etc

because it was so long ago and he didn't expect it to come back to haunt

him. Any suggestions welcome.

 

[Papercut]

It sounds as if he didn’t request a closure figure (amount owed plus accrued/uncharged interest) for his loan, & instead just paid what the amount that was showing as outstanding on the loan account & as far as he was concerned it was fully paid off. Either that or the sister bank didn't. The interest was more than likely being added to the loan account on a quarterly basis & he probably paid the loan amount off during a quarter. In other words there was a small amount of interest owed & not yet added. This has now increased due to it still being unpaid.

He should explain the situation to his bank & perhaps they would be prepared to write it off, as he may have been misled by the sister bank down south if he told them that he wanted to pay his loan off.