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  • FIRST POST
    • mschris
    • By mschris 6th Feb 18, 10:13 PM
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    mschris
    Service charge - "admin" fee for Direct Debit
    • #1
    • 6th Feb 18, 10:13 PM
    Service charge - "admin" fee for Direct Debit 6th Feb 18 at 10:13 PM
    Hi,

    I hope this is the right board, I'm being charged £25 to setup a monthly Direct Debit (instead of yearly) to cover "admin" fees for my service charge - is this legal?

    Can i be charged £25 to setup for a monthly DD?
Page 1
    • G_M
    • By G_M 6th Feb 18, 10:35 PM
    • 43,185 Posts
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    G_M
    • #2
    • 6th Feb 18, 10:35 PM
    • #2
    • 6th Feb 18, 10:35 PM
    I suspect the answer depends on your lease.

    What does your lease say about admin charges?

    And how often does your lease say your service charge is payable? if it is not monthly, then you've requested a payment term other than as specified in your lease so can be charge for setting up this non-standard frequency.
    • davidmcn
    • By davidmcn 6th Feb 18, 10:40 PM
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    davidmcn
    • #3
    • 6th Feb 18, 10:40 PM
    • #3
    • 6th Feb 18, 10:40 PM
    Unless your lease says something to the contrary I don't see why they can't charge it. Presumably from what you're saying you can avoid it by paying annually?
    • eddddy
    • By eddddy 6th Feb 18, 10:41 PM
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    eddddy
    • #4
    • 6th Feb 18, 10:41 PM
    • #4
    • 6th Feb 18, 10:41 PM
    I guess you you mean that you are a leaseholder, and this admin fee is being charged by your freeholder or their managing agent.

    If so, the law says that any admin fee not stated in the lease must be 'reasonable' - so it must reflect the effort involved and/or the costs incurred.

    If the freeholder/managing agent insists on charging the £25, and you want to challenge it, you'd have to go to the tribunal. It's probably not worth the hassle.

    And TBH, I think the tribunal might say that £25 is a reasonable fee.
    Last edited by eddddy; 06-02-2018 at 10:43 PM.
    • AFF8879
    • By AFF8879 6th Feb 18, 11:59 PM
    • 281 Posts
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    AFF8879
    • #5
    • 6th Feb 18, 11:59 PM
    • #5
    • 6th Feb 18, 11:59 PM
    £25 is likely to be reasonable given the freeholder probably isn't a large company with the access to payment infrastructure etc that allow most DDs to be set up free of charge.

    Can you not just set up a standing order instead?
    • mschris
    • By mschris 7th Feb 18, 9:32 AM
    • 13 Posts
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    mschris
    • #6
    • 7th Feb 18, 9:32 AM
    • #6
    • 7th Feb 18, 9:32 AM
    I guess you you mean that you are a leaseholder, and this admin fee is being charged by your freeholder or their managing agent.
    Yes

    And TBH, I think the tribunal might say that £25 is a reasonable fee.
    Really? £25 to setup a DD monthly instead of annually? Surely it's the same process, instead of setting a DD to 1 payment once a year it's set to monthly and the figure divided by 12. Surely that can't be more work to the value of £25?

    What is the work someone is doing?

    Can you not just set up a standing order instead?
    I don't think so, they would need to agree or something to a SO. Also, I can do an SO or a bank transfer, but that doesn't result in any protection. If I want to challenge it in some way a DD provides a tiny layer to helps should something go wrong.
    • davidmcn
    • By davidmcn 7th Feb 18, 9:37 AM
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    davidmcn
    • #7
    • 7th Feb 18, 9:37 AM
    • #7
    • 7th Feb 18, 9:37 AM
    But just to clarify, we are talking about an optional facility to pay monthly by DD and they still offer an alternative fee-free method of payment instead? And there's nothing relevant in your lease about it?
    • bap98189
    • By bap98189 7th Feb 18, 9:44 AM
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    bap98189
    • #8
    • 7th Feb 18, 9:44 AM
    • #8
    • 7th Feb 18, 9:44 AM
    Really? £25 to setup a DD monthly instead of annually? Surely it's the same process, instead of setting a DD to 1 payment once a year it's set to monthly and the figure divided by 12. Surely that can't be more work to the value of £25?

    What is the work someone is doing?
    Originally posted by mschris
    Somebody at the company end now has to check 12 times that a payment has been received and allocated correctly to the OP's account.

    They also now have 12 bank transaction charges to pay instead of 1 (business banking isn't free).

    It wouldn't be hard to justify costs for that of £25 per year.
    • Nobbie1967
    • By Nobbie1967 7th Feb 18, 10:01 AM
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    Nobbie1967
    • #9
    • 7th Feb 18, 10:01 AM
    • #9
    • 7th Feb 18, 10:01 AM
    Are the service charges paid in advance? If normal practise is to pay whole amount in Jan, but you're proposing to pay over the year, they are extending credit to you, so the £25 charge sounds reasonable, much like you get with car insurance.
    • eddddy
    • By eddddy 7th Feb 18, 11:02 AM
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    eddddy
    Somebody at the company end now has to check 12 times that a payment has been received and allocated correctly to the OP's account.

    They also now have 12 bank transaction charges to pay instead of 1 (business banking isn't free).

    It wouldn't be hard to justify costs for that of £25 per year.
    Originally posted by bap98189
    In the past, I believe that the tribunal has accepted that £50 per hour is a reasonable admin charge rate.

    So that represents half an hour's work over the space of a year (ignoring bank charges) - I think the managing agent could probably justify that.
    • G_M
    • By G_M 7th Feb 18, 11:03 AM
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    G_M
    I notice you are responding, but have not answered any questions raised here.

    What does your lease say?
    • mschris
    • By mschris 7th Feb 18, 3:30 PM
    • 13 Posts
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    mschris
    But just to clarify, we are talking about an optional facility to pay monthly by DD and they still offer an alternative fee-free method of payment instead? And there's nothing relevant in your lease about it?
    Yes, that's what we're talking about.

    Somebody at the company end now has to check 12 times that a payment has been received and allocated correctly to the OP's account.

    They also now have 12 bank transaction charges to pay instead of 1 (business banking isn't free).

    It wouldn't be hard to justify costs for that of £25 per year.

    Why is this a manual process? No mobile phone company is checking 1000s of DD manually. This is all automated, hell, I'm sure I could find software online to do this at £25 per year for 1000s of users.

    Are the service charges paid in advance?
    Yes.

    If normal practise is to pay whole amount in Jan, but you're proposing to pay over the year, they are extending credit to you, so the £25 charge sounds reasonable, much like you get with car insurance.
    Kinda - car insurance you're paying for a finance deal. This isn't that. I'm just paying over 12 months.

    I just feel like this impacts people like me, people that can't afford to pay all of it in one-go. I can't pay by credit card either.
    • eddddy
    • By eddddy 7th Feb 18, 4:13 PM
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    eddddy
    Why is this a manual process? No mobile phone company is checking 1000s of DD manually. This is all automated... I'm sure I could find software online to do this at £25 per year for 1000s of users.
    Originally posted by mschris
    Because mobile phone companies have many thousands of customers who pay monthly by DD - they will have invested hundreds of thousands of pounds in technology to automate billing and payments.

    For a freeholder who has maybe 20 or 30 leaseholders who pay by monthly DD, I suspect that...

    - an accounts clerk logs into their online banking in one window on their pc
    - then logs into their leaseholder accounts application in another window
    ... and manually copies and pastes the numbers across

    I'm sure I could find software online to do this at £25 per year for 1000s of users.
    Originally posted by mschris
    So maybe you should get out there and sell the software your services to managing agents all over the country.
    • G_M
    • By G_M 8th Feb 18, 10:17 AM
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    G_M
    Yes, that's what we're talking about.
    I repeat - what does your lease say?
    When/how are you obligated to pay?
    Is this an alternative facility they are offering voluntarily to extend to you, which they don't have to agree to? In which case they can impose whatever terms they wish, and you can either agree, or pay as required by the lease.

    Why is this a manual process? No mobile phone company is checking 1000s of DD manually. This is all automated, hell, I'm sure I could find software online to do this at £25 per year for 1000s of users.
    Phone comanies have complex IT systems linking call records to billing to bill payment.

    Yes.
    Then you are asking to stop ayng in advance but to pay monthlyy instead.

    Kinda - car insurance you're paying for a finance deal. This isn't that. I'm just paying over 12 months.
    You are asking for a finance deal! Instead of paying eg £1,200 on Jan 1st, you are asking to pay £100 on 1st of each month. Your final December payment will be 11 months late. That's like a finance deal.

    I just feel like this impacts people like me, people that can't afford to pay all of it in one-go. I can't pay by credit card either.
    Originally posted by mschris
    Yes. Pele n low incomes and/or with limited savings are impacted more than others.
    • mschris
    • By mschris 9th Feb 18, 9:55 AM
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    mschris
    I repeat - what does your lease say?
    When/how are you obligated to pay?
    Is this an alternative facility they are offering voluntarily to extend to you, which they don't have to agree to? In which case they can impose whatever terms they wish, and you can either agree, or pay as required by the lease.
    I need to dig out the actual wording. My question was around the cost of setting up a monthly DD i didn't think it was really relevant as this would apply any monthly DD.

    Phone comanies have complex IT systems linking call records to billing to bill payment.
    I don't think that they're "complex," councils have them, independent gyms have them. I'm pretty sure if did some reason I would be able to find a simple service to do this, especially in 2018. It's essentially some pretty simple software.

    You are asking for a finance deal! Instead of paying eg £1,200 on Jan 1st, you are asking to pay £100 on 1st of each month. Your final December payment will be 11 months late. That's like a finance deal.
    I don't think I am. 1) this a is a pre-emptive cost. I am paying upfront for services yet to be delivered. With a car I would already be in possession of this.

    In fact, technically speaking they would have £100,000+ sitting in an account gaining a significant amount of interest for a prolonged period.

    I think you're going off the main point - do you think it's fair to charge £30 to setup a monthly DD rather than paying yearly?

    Focus on the principle, surely this feels like a dated, illogical charge that penalises anyone that can't afford big upfront costs like this.
    • davidmcn
    • By davidmcn 9th Feb 18, 10:19 AM
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    davidmcn
    I don't think I am. 1) this a is a pre-emptive cost. I am paying upfront for services yet to be delivered. With a car I would already be in possession of this.
    Originally posted by mschris
    No, you wouldn't already be in possession of a year's insurance, you'd merely have paid upfront for it (e.g. you could cancel it during the year and get a pro rata refund).

    I'm with G_M on this - if they're entitled to the annual lump sum up front, but you opt to pay it off over the year (a facility which they're not obliged to offer at any price), then what they are mainly doing is charging you for credit, not the admin of processing your direct debits (though that may also be a factor). How much would it cost you to borrow the money from elsewhere?
    • saajan_12
    • By saajan_12 9th Feb 18, 11:30 AM
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    saajan_12
    Paying over 12 months should be more expensive than paying upfront for many reasons
    a) admin of processing 11 extra payments, allocating them to your account
    b) credit risk of you not paying due to changed circumstances in several months time
    c) lost interest on part of amount

    All in I'd charge more than £25 for the installments. OP, pay the fee or borrow the money to pay the service charge upfront.
    • gingercordial
    • By gingercordial 9th Feb 18, 12:54 PM
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    gingercordial
    I think you're going off the main point - do you think it's fair to charge £30 to setup a monthly DD rather than paying yearly?
    Originally posted by mschris
    Yes actually, I do. It really isn't comparable to a huge company like the mobile phone giants.

    Are you saying if you paid annually it would be by direct debit?

    If so, I grant you there shouldn't be much difference in terms of setting up an annual one versus one that takes payment monthly. However it will still require somebody to keep on top of who has paid monthly. Even if they do have software that can cross-check DDs received with leaseholder payments due (and that doesn't come cheap!) there is still somebody who needs to receive and investigate an exceptions report each month, chase those who have cancelled their DDs/had them bounce for lack of funds/things gone wrong with current account switches etc (there will always be some of these). They don't know you're one of the people who is always going to pay yours on time. Even if your DDs always go through perfectly, unfortunately you are paying for this monitoring service and to an extent subsidising your fellow leaseholders who may have had DDs bounce in the past making cross-checking necessary.

    If your annual payment option is not by DD, and paying monthly means they have to set one up when they wouldn't have had to at all, I don't think you have a leg to stand on.

    On top of this is the fact that they are effectively extending you credit terms, as others have said.

    So no, I don't think £25 is unreasonable for that. Though I agree it does penalise those on lower incomes who can't pay upfront in exactly the same way that insurance companies and the DVLA do.
    • mschris
    • By mschris 9th Feb 18, 10:48 PM
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    mschris
    Are you saying if you paid annually it would be by direct debit?
    Yes

    chase those who have cancelled their DDs/had them bounce for lack of funds/things gone wrong with current account switches etc
    Yes but those are charged. Like £20 per bounce for that money has been allocated to chase these people.

    I don't think you have a leg to stand on.
    Ok

    So no, I don't think £25 is unreasonable for that. Though I agree it does penalise those on lower incomes who can't pay upfront in exactly the same way that insurance companies and the DVLA do.
    Urggh it's just the way isn't it. I hate it, I can't even put this on an interest free credit card.

    Ok thanks for your replies. I feel like in principle this shouldn't exist but I think I will just have to swallow it.
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