Overdrafts and your ‘first right of appropriation’
If you're overdrawn when you receive your payment
The law provides that you need a minimum amount of money to live on. You can protect your payment from being applied to an outstanding overdraft by telling your bank it should only be used for a specific purpose, for example to pay your energy bills. This protection is called a "first right of appropriation of funds order".
You can use this for any money being paid in to your account. You will need to tell your bank how to use these payments.
How to request a first right of appropriation of funds order
You need to write to your bank at least seven days before your payment is due, making it clear that your rebate payment is to pay for your utility bills only.
For example, you may want to instruct your bank or building society:
On or around (insert date) my energy bills rebate payment of £150 from Central Bedfordshire Council will be paid into my current account, number (insert account number). I am exercising my first right of appropriation over these funds and wish you to pay the following items from it: (e.g.) my electricity and gas payments to (insert your supplier).
Keep a copy of the letter in case there is any dispute later. You may want to ask your bank or building society for a written acknowledgement of your instructions.
If there are any items you no longer want to pay from your account, or which you cannot afford, you should give your bank separate cancellation instructions. This is because the first right of appropriation does not stop the bank from paying items as well as those you have listed.
If you do not cancel these items, your bank may return the items as unpaid, which they may charge you for. However, payments from your account to repay a loan with the same bank can't be cancelled.