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Negative account balance recovery process

  • #1
  • First Post: Aug 9, 2017 9:50am Aug 9, 2017 9:50am
Hi

If a clients account balance goes into minus territory below zero, if the broker does not offer negative account balance protection (which a growing number of brokers are now offering) what things will brokers do and what lengths will brokers go to to recover the losses, and for how long?

Thanks.
  • #2
  • Aug 9, 2017 12:30pm Aug 9, 2017 12:30pm
Quoting Nebula
Hi If a clients account balance goes into minus territory below zero, if the broker does not offer negative account balance protection (which a growing number of brokers are now offering) what things will brokers do and what lengths will brokers go to to recover the losses, and for how long? Thanks.
unless it is a lot, probably they will do nothing. the broker ill take the loss, ( if there is any real loss at all for them).

the same way a trader wont chase a scam broker for 1000$. the trader would take the loss.
there is always, always another trade!!
  • #3
  • Aug 9, 2017 1:04pm Aug 9, 2017 1:04pm
IF you are in the USA
broker can affect your credit score by suing and having public judgment.
but 90% of the time they leave you alone , unless its a big amount
Frank Fadi
  • #4
  • Aug 9, 2017 1:48pm Aug 9, 2017 1:48pm
It may depend slightly on where they are and where you are.

But in general, unless it's a high 5-figure amount, they may well threaten only and not actually do anything.

From their perspective, the risk of adverse publicity - even if they win - is pretty real, particularly in these days of forums, social media and so on. They often decide to minimize the damage by walking away.
  • #5
  • Aug 9, 2017 6:57pm Aug 9, 2017 6:57pm
I wouldn't be so sure that brokers care that much about bad publicity. From what I've read, they will chase you down for negative account balances, and will only hold back from issuing bankruptcy proceedings if they think you haven't got any assets worth seizing.

During the Jan 2015 CHF/EUR gapping event, IG (who do not offer negative balance protection) had clients who racked huge negative balances in a matter of minutes. One guy, a teacher in Ireland suddenly had losses of £280,000. IG said about half of its affected clients "settled" (presumably under the threat of court action) but also said :

"Meanwhile, IG isn’t going to let those debts go. Its chief executive, Tim Howkins, said: “We’ve got no interest in pursuing through the courts or bankrupting somebody who just clearly can’t pay, but equally we’re not going to let people off where they have got some ability to pay some of the debt."

http://www.independent.co.uk/news/bu...-10115157.html

Personally, I won't ever use a broker that doesn't offer negative balance protection.
  • #6
  • Edited 4:48am Aug 10, 2017 4:22am | Edited 4:48am
Quoting Forex-Jedi
I wouldn't be so sure that brokers care that much about bad publicity. From what I've read, they will chase you down for negative account balances, and will only hold back from issuing bankruptcy proceedings if they think you haven't got any assets worth seizing.

During the Jan 2015 CHF/EUR gapping event, IG (who do not offer negative balance protection) had clients who racked huge negative balances in a matter of minutes. One guy, a teacher in Ireland suddenly had losses of 280,000. IG said about half of its affected clients "settled" (presumably under the threat of court action) but also said :

"Meanwhile, IG isn’t going to let those debts go. Its chief executive, Tim Howkins, said: “We’ve got no interest in pursuing through the courts or bankrupting somebody who just clearly can’t pay, but equally we’re not going to let people off where they have got some ability to pay some of the debt."

http://www.independent.co.uk/news/bu...-10115157.html

Personally, I won't ever use a broker that doesn't offer negative balance protection.
Good post jedi, completely agree, which means also not trading a financial instrument that can lead to negative balances, and having spoken to a few brokers negative account balances are perhaps more common than many would imagine.

The good news is more and more brokers are now offering NABP, presumably as a result of client/regulator demand.

In Germany -
Quote
Breaking: BaFin Gives CFDs Brokers Three Months to Add Negative Balance Protection
The German regulator is using the ‘intervention option’ to protect retail clients from negative balances.
http://www.financemagnates.com/forex...ce-protection/

An interesting account of one mans experience with IG chasing him for losses as a result of the swiss bank situation.
Quote
Spread Betting Firm Chasing for >250k negative balance
https://getoutofdebtfree.org/forum/v...85110&start=60

Quote
Forex brokers providing Negative balance protection
https://www.forexbrokerz.com/page/fo...nce-protection
  • #7
  • Aug 10, 2017 12:00pm Aug 10, 2017 12:00pm
It’s hard to know without actually facing such situation. I believe that we should better use broker that covers this and offers protection on negative balance which keeps one very secure and comfortable and adds easiness to things. I feel at ease having this sort of option, as you don’t need to take extra tension or stress over it. So, that’s why we need to be very wise with these things.
  • #8
  • Last Post: Oct 13, 2023 1:28am Oct 13, 2023 1:28am
Quoting Forex-Jedi
I wouldn't be so sure that brokers care that much about bad publicity. From what I've read, they will chase you down for negative account balances, and will only hold back from issuing bankruptcy proceedings if they think you haven't got any assets worth seizing. During the Jan 2015 CHF/EUR gapping event, IG (who do not offer negative balance protection) had clients who racked huge negative balances in a matter of minutes. One guy, a teacher in Ireland suddenly had losses of £280,000. IG said about half of its affected clients "settled" (presumably...
How could they actually take a legal action on the oversea country actually? I still don't understand, i believe that in some countries the 'debt' couldn't even be official registered.
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