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Direct Debit question please?
Comments
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David,
With the example of the returned payment then this would come back under consequential loss. I would approach the bank to try and resolve this first however the Financial Ombudsman would likely rule in your favour if they failed to resolve it directly.0 -
Gavin,_Clear_Academy wrote: »Firstly the problem that you experience with consequential loss is that the banks are not obliged to pay it to you until they recover it from the company.
Why so?
To remove funds from my account, my bank must have an authority from me, either to pay a third party, or to pay a bank fee I have agreed to, under the terms and conditions of my account.
If an erroneous direct debit request for £100 arrives when I have £50 available, the bank has no authority from me to charge me its direct debit bouncing fee, and must IMO refund it, instantly. If (which I doubt) some banks' T&C imply otherwise, then the purported T&C is void, under the Unfair Contract Terms in consumer contracts regulations.
Of course, the bank is free to seek compensation from the erroneous direct debit taker for the bank's trouble, but that is nothing to do with me. The bank is also free to ask the direct debit taker whether it agrees that the direct debit request was erroneous. If the direct debit taker can prove it is in the right, then
(a) it can, of course, pursue me for its £100 by other means; and
(b) the bank can demand its direct debit bouncing fee after all, and threaten to close my account because I have misled it.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
Not so. If I say there is an error, then under the terms of the Direct Debit Guarantee, my bank must reverse the direct debit, immediately.Gavin,_Clear_Academy wrote: »I can't define error any better than you can really but it is there to explain that you can't claim a refund just because you didn't like the service or you fell out with the company. i.e. if no error has been made under the terms of the Direct Debit rules then you would not be entitled to a refund.
http://www.financial-ombudsman.org.uk/publications/ombudsman-news/27/27-directdebit-guarantee.htm
It is not for the bank to question (at this point) whether there has indeed been an error. Unfortunately, many bank staff do not know this, or pretend not to know it.
If the direct debit taker can prove that it was in the right, then it can, of course, as I said above, pursue me for payment by other means (and apply any additional charges imposed by the T&C of my contract with it.) It can also denounce me to my bank as an abuser of the Direct Debit Guarantee, and my bank can then (for example) warn me that if I do it again, it will close my account.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
You are correct in so much as it is not the banks role to decide whether or not an error has actually occurred, they must take the customers word, refund the payment and submit an indemnity claim to the service user. They can only do this however if the 'error' falls within one of the defined scenarios for an indemnity claim as set out in DD rules. If it later becomes apparent that no error has occurred then the service user can depending on the type of error that was alleged and the DDI setup mechanism used make a counter claim to the payers bank.0
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Why so?
To remove funds from my account, my bank must have an authority from me, either to pay a third party, or to pay a bank fee I have agreed to, under the terms and conditions of my account.
You'd think so, wouldn't you.
With paper based DD's that is precisely how it used to work - the bank had your authority in writing with your signature, which could be verified against the bank records.
With paperless DD, the bank never has your authority to release your funds to the payee.
What the bank gets is purely the payee's say so that you have authorised them to do so, and in turn, that you are instructing the bank to comply with and follow that instruction.
It is this subtle but rather important difference which is pivotal.0 -
Greetings.
I seem to have opened a can of worms here.
Many thanks to Mark in Hampshire and all who have responded.
Petel0 -
Mark_In_Hampshire wrote: »You'd think so, wouldn't you.
With paper based DD's that is precisely how it used to work - the bank had your authority in writing with your signature, which could be verified against the bank records.
With paperless DD, the bank never has your authority to release your funds to the payee.
What the bank gets is purely the payee's say so that you have authorised them to do so, and in turn, that you are instructing the bank to comply with and follow that instruction.
It is this subtle but rather important difference which is pivotal.
Sure there are increased risks of paperless DDI's but this is balanced from the increased protection offered under the guarantee and convenience to the customer. Originators cannot counter claim when the DDI is paperless only when a signed mandate exists, this is the risk they have to take if they want to offer paperless setup. To reduce the risk to originators they have to go though steps to validate the customer’s identity when setting up the mandate.
From the point of view of the customer if you do not recognize a DDI on your account and it was setup via the paperless system you are entitled to an immediate refund no questions asked.
Paperless DDI is a key part of the direct debit scheme which you agree to in the terms of conditions of your bank account. On the whole it is great advantage to the customer.0 -
It shouldn't matter, if (and I agree it is a big if) the direct debit taker sticks to the rules. It is supposed to confirm to you in writing, at the address you have given, that it is setting up the direct debit, and give you notice of the amount. It probably should also do an address check, for example using a credit reference agency. That should have enabled (for example) Jeremy Clarkson, if he was awake, to tell the diabetes charity it had been duped, and forestall the direct debit payment from his account.Mark_In_Hampshire wrote: »What the bank gets is purely the payee's say so that you have authorised them to do so, and in turn, that you are instructing the bank to comply with and follow that instruction.
It is this subtle but rather important difference which is pivotal.
What went wrong in my experience was that Abbey wrote to its customer at its customer's correct address, but quoting my account number, which was very similar to its customer's, who did not notice the error. The system then (I think) permitted Abbey simultaneously to set up the direct debit on my account, and take a first payment. As I said, fortunately I spotted it quickly, and did get an immediate refund. (And I also demanded, and got, £50 compensation direct from Abbey for the annoyance and distress.)
It would help if there was a rule that your bank must notify you (eg by email or text message) whenever a new direct debit is notified to it.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
Hi Young Nick,
Nearly right but the reason that you give must be one of 8 pre-defined "Valid" reasons for an indemnity claim. This lays down to the banks under which circumstance they must refund. I can't post the list of reasons however it is not just because you say there has been an error. It must be a "Valid" reason as defined by the scheme rules.
Regards, Gavin.0 -
So will DDICA, to be introduced next month, help speed up DD guarantee claims for the customer?
Be nice to see "immediate" becoming just that...immediate!0
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