I regularly get emails from women who signed up to a joint bank account or a joint personal loan with their partner where the bank is pursuing them for the whole debt after the relationship has broken down. Or where their ex partner refuses to pay their share. So what are the rules and how can you protect your financial position?
Who’s responsible for debts on joint accounts – SavvyWoman’s survey
I asked Opinium Research to carry out the survey on over 2,000 adults in 2013. The question asked was: Imagine you have a joint loan (such as a mortgage or car loan) with a partner; what do you think would happen if you split up?
- 31% said they would each be liable to pay half the loan;
- 39% said that each person would be liable to pay the entire loan, and the bank may pursue either for the full amount;
- 6% say whoever spent the money is liable and
- 24% said they do not know
The correct answer – as savvy women know – is b. Interestingly, in my survey, more women knew the answer than men.
Information banks give
Banks have to tell you that you’ll both be responsible for all of the debt, but there are no rules about how they hand out that information – and some are definitely more consumer friendly than others.
- Barclays, Lloyds TSB, NatWest and RBS include the information in their terms and conditions (which is a booklet 62 pages long, in NatWest’s case).
- HSBC sends out a separate 12-point letter explaining who’s responsible for what.
- Nationwide tells people who are applying in a branch or over the phone (it’s part of the employees’ script). If you buy online, the information is just in the terms and conditions.
- Co-operative bank sends out a one page form which states your responsibilities clearly. Out of all the banks I questioned, it is the one with the clearest explanation.
How to protect your finances
If you’ve taken out a joint loan or bank account with an overdraft facility, make sure you know what you can do in advance to protect your position and the steps you can take if your relationship breaks down.
- Consider drawing up an agreement. If you’re going to take out a joint account or loan with your partner, consider drawing up a short agreement about what happens to the debt if you split up. At the very least, it will force you to think about the options should the worst happen.
- Freeze joint accounts. If you think your ex will run up debts. Contact the bank as soon as possible to freeze the account or put a restriction on it. This ensures neither party can take money out without the other’s knowledge.
SAVVY TIP: Different banks have different approaches when it comes to joint accounts. In some cases one party may be able to freeze a joint account, but both will have to sign a document to unfreeze it. This should be explained upon opening the account.
- A fresh start. Both parties need to arrange for joint accounts to be closed and to open new accounts in their own names. Ensure the bank or building society is informed on how to handle any standing orders or direct debits; how money should be divided and how any overdraft will be dealt with. Remember, if the bank has always addressed information to one partner, it will continue to do so unless told otherwise.
- Personal confidentially. If leaving the family home, banks should keep new contact details confidential when asked.
- Keep the peace. Try and reach an agreement with your ex about how the debt will be repaid, and talk to your bank to see if they can help. Even though both parties are liable for the entire debt, the bank should deal with cases sympathetically.
If your bank isn’t helpful
Your bank doesn’t have to split the debt or let each of you pay off half each, but it should try and be helpful. If it isn’t or if it is obstructive, complain to the Financial Ombudsman Service.
The Financial Ombudsman Service says it would expect a lender to treat the consumer fairly and sympathetically if they are experiencing financial hardship, and if the consumer feels the situation has been made worse by the lender, the ombudsman may consider the complaint.
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