A creditor is an individual or an organization owed money because it provided others with products, services, or loans. There are two types of creditors. The first one is Loan creditors, which include Banks, Financial institutions, and other building societies. The second one is trade creditors, who are actually a supplier of goods that have not been paid yet for the goods purchased on account. (Gocardless.com/guides)
How do Creditors Find my Bank Account?
It is not necessary to share the exact bank account information with any creditors.
From the Name of the Bank
By knowing the name of the Bank or financial institution where a borrower has a bank account, creditors can find the account information. If a creditor knows where the borrower is holding a bank account, the creditor can provide the Bank with a copy of the court judgment and a copy of writ of garnishment and get the account details from the Bank. Then the Bank will not only provide the creditor with account information but also freeze the appropriate account. The information that the Bank will share includes
- Name of the account
- Type of account
- Account number
- The current balance of an account
- Obligations of account
From The Payment through Bank Check
If creditors are paid through a check, then they know from which account and which branch they can get account information in case of necessity.
From Location of Borrower
If the creditors know where a borrower lives, they can search all the banks located nearby by the name of the borrower. If a borrower lives in a particular area of a city, creditors can reach all the banks established in that area and seek information about the borrower.
Using Skip Tracer
Skip tracing is a business term that describes the process of locating anyone or any information that is missing from its usual location where that information or person is supposed to be. Here skip means that information or person is missing from the usual location, and tracing means hunting that person or information. In the case of creditors, they use skip-tracer when the borrower changes the bank account without the knowledge of the creditors.
From Credit Application Documents
A credit application is another easy way a creditor can locate a bank account. The credit application is a document that a borrower fills in when he is taking any loan from the creditors such as banks or financial institutions. And most of the time, these credit applications include requirements about bank information. This information can be just the name of the Bank where the borrower has an account. This little piece of information is enough for them to get a hold on the borrower’s account using court judgment copy.
What do Creditors Do with Bank Account Information?
Can make a withdrawal with default debt payment document: Creditors use a bank account to make a default debt payment to them. Providing a creditor with bank account details means giving them access to make payment to their debt using legal action even without the borrower’s knowledge.
Can withdraw more than the actual debt amount: If a creditor withdraws an excess amount of money from the identified bank account, it will be difficult for the borrower to get that extra amount back. Because the trial of remedy of duplicate withdrawals will result in error by creditors as they know its battle where they have advantages against borrowers.
Court order Access: Creditors can take money from a borrower’s bank account only with court approval.
Usually, for preventing borrowers from prior withdrawal by themselves, creditors first notify the Bank about court order access, and after a couple of days, they inform the borrower. And the levy only applies to the amount currently available during Bank gets the notification. If the borrower holds more money in a bank account than the debt default, the Bank won’t honor the outstanding check or debit card, or ATM transaction of the account holder. If the borrower has a credit card liability on the account, usually, it is paid from the account balance. In case of court order transactions, Bank freezes the use of credit cards. (pocketsense.com) (Pocketsense.com/credit)
How to Prevent Creditors from Getting Bank Account Information?
The best way of preventing a creditor from getting any information is not to mention the existence of a bank account. And if creditors make it a compulsory requirement to have a bank account for taking a loan, it is preferable to create a separate account for that requirement. And if creditors require automatic payment and debit card payment, it is better to create a new debit card and not share the one that the borrower use for business purpose. (Pocketsense.com/credit-card)
What to Do when Creditors Freeze Borrowers’ Accounts?
If the creditor knows about the borrower’s account and gets court order access, they can freeze and levy the borrower’s bank account and make payment to default credit payment of the borrower. But freezing bank accounts can lead to hardship for borrowers. It may cause difficulties in paying daily living expenses. In that case, the borrower can file an application to the court with written evidence of hardship. And the evidence can include the following information
- Copies of salary and wages slips
- Bank transaction statement
- Rent book
- Documents showing the financial condition
The effect of account freezing can also cause hardship for other family members. It should also be mentioned in the application. (citizensadvice.org.uk)
Bibliography
- citizensadvice.org.uk. (n.d.). Retrieved from https://www.citizensadvice.org.uk/debt-and-money/action-your-creditor-can-take/creditor-takes-money-from-your-bank-account/
- Gocardless.com/guides. (n.d.). Retrieved from https://gocardless.com/guides/posts/debtors-and-creditors/
- pocketsense.com. (n.d.). Retrieved from https://pocketsense.com/creditors-bank-account-24222.html
- Pocketsense.com/credit. (n.d.). Retrieved from https://pocketsense.com/credit-card-companies-access-bank-account-balances-21880.html
- Pocketsense.com/credit-card. (n.d.). Retrieved from https://pocketsense.com/credit-card-companies-access-bank-account-balances-21880.html
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