what is a "fair" unpaid Direct Debit charge?

chompie

Sorry i asked

Sol00

According to some, the amount it costs a bank, realistically, is £2.50. So banks should be charging this IMO.

It'll be a long time before this is all concluded though.

simon_templar_2

Or dont bounce DD's thus avoiding paying anything.

natweststaffmember

I think that charging 1 banana if its a standing order, 2 bananas if its a direct debit and a pineapple if you go over your overdraft is fair but I could be wrong.

Nathan_Spleen

what is a "fair" unpaid Direct Debit charge?

According to the South African Competition Commissioner a fair charge is 5 Rand - about £4.

Previously charges in South Africa were 45 Rand - £35.


8.2.3 Recommendations on penalty fees


Both the level and the volume of the fees charged for rejected debit orders by the major banks provide grounds for grave disquiet. Payment by debit order is routinely required nowadays for all manner of regular services which have become an essential part of everyday life. Reliance on debit orders is widespread throughout the mass market served by banks, and it is notable that debit order facilities have recently been added to the basic Mzansi account offerings.

Analysis of the banks’ data revealed that the average rate at which debit orders are rejected, and thus attract a penalty fee, is roughly twice as high for basic savings or transmission accounts as for all PTAs taken together. In other words, in accounts typically held by lower income customers, a relatively high proportion of debit orders presented for payment are dishonoured for insufficient funds. This means that the burden of penalty fees is falling disproportionately on those least able to afford them. Where detailed data has been provided, indications are that as much or even more revenue is earned by banks from rejected debit orders on these accounts than from the processing of successful debit orders. Many ordinary bank customers are not in a position to pad their bank accounts with funds that are surplus to their immediate needs. They face the situation where, when credits such as salary payments are delayed, this causes the debit orders which they have signed in good faith to “bounce” for insufficient funds. It is not a matter of neglect, or irresponsibility, but of circumstances beyond their control. Yet the penalty fee is applied per debit order item, so that a customer may face multiple penalties to add to the primary misfortune of getting paid late.

Customers on low incomes, with tight credit margins, can readily find themselves lacking sufficient funds without having had any intention of defaulting on their payments or of breaching their undertakings to the bank.

It seems to us quite unacceptable that a bank should recover more than the cost incurred in processing the rejections in such cases. It is no answer for banks to say that, on application, they might reverse the penalty fee in a deserving case. Very many consumers – even if they were assured of the possible indulgence – would suffer in silence rather than muster the confidence, or find the time, to challenge the debit when it appears on their account.

We recommend that a cap be imposed on the price of processing rejected debit orders at approximately R5 per dishonoured item.

We have no reason to believe that, currently, banks would be unable fully to recover their costs ordinarily incurred in respect of rejected debit orders within such a cap. Such a cap should be imposed by regulation. It should apply both to savings and current accounts, and to ordinary as well as early debit orders. Banks, which incur additional expenses or losses in particular cases through their customers’ default in respect of debit orders, can terminate those customers’ accounts and/or sue for damages.

The regulatory remedy should also include a provision to ensure that the re-presentation of dishonoured items cannot itself amount to an abuse.

Whether such price regulation should be imposed using existing regulatory powers of the SARB, or by way of section 9(1) of the Sale and Service Matters Act 25 of 1964 (as amended), or by other existing or special legislation is a matter on which we are not best placed to express an opinion.

In our view, if the necessary regulatory intervention is not forthcoming within a reasonable time, the Competition Commissioner should recommend to the Minister of Trade and Industry that he consider directing the Consumer Affairs Committee established under the Consumer Affairs (Unfair Business Practices) Act 71 of 1988 (as amended) to conduct a full-scale investigation into dishonour fees in respect of debit orders charged by the four major banks.

Should the latter Act be replaced by the enactment of the Consumer Protection Bill, 2007, now before Parliament, then the necessary investigation could be initiated or continued as may be appropriate under the new Act.

We also recommend that systems should be put in place by the banks, which will enable customers to cancel any direct debit instruction at any time by phone, internet, or over the counter at a branch (subject to written confirmation by the customer where necessary). This would not alter the customer‘s contractual obligation to the creditor in respect of payment arrangements.

shino

my mortgage is with mortgage trust limited.they have charged me £50 for unpaid dd fee.I read on MSE that such charge can be reclaimed so I ask the bank to refund it but they are persistant that it is my contractual obligation to pay the mortgage on time and because the lender has to put another request to my bank to pay them themortgage so they have to charge me £50.I then wrote to financial ombudsman service following martin advice and templete letter but the ombudsman service has replied the they cant deal with my complain because the mortgage trust services plc is not covered by the scheme.they have writtn that financial services act 1986 and the services & market act2000 come in force in april1988& dec2001and investigate complaints about activites or services provided by firms regulated by act.
I dont know what to do next . can some one help

willo65

Sol00 wrote: »

According to some, the amount it costs a bank, realistically, is £2.50. So banks should be charging this IMO.

It'll be a long time before this is all concluded though.

Why?

It costs Tesco about 7p for a tin of beans but they charge me 21p not 7p.

custardy

for me about £10
there has to be some punitive measure else some would just keep doing it

proeleche

I'm getting fed up reading people's criticism of others because they don't have huge amounts of surplus funds in their accounts to cover every possible eventuality.

Yes, banks are a business and businesses are in the business of making money - however, they should not be in the business of ripping people off.

The person above stated their should be some 'punitive measure' to stop people doing it again, by the same reasoning would this person perhaps advocate the death penalty?

Yes, it probably does cost the banks to reverse transactions etc, they should not take the hit for other people's mistakes - the whole point of this site, martin's philosophy is that it should be fair, reasonable and most importantly proportionate.

If it costs them £2.50 because I have not got my affairs in order, I agree I should pay that and if I have borrowed money I should pay interest on it but again the banks measures should be fair, reasonable and proportionate.

Rant over. Just be nice and keep sarcastic and ignorant comments to yourselves.

custardy

i got a bank charge last month,im not whiter that white
work screwed up my overtime,i had counted on it and was £6 short of a DD
boom £35 charge
it was unavoidable for me but i accept it was my fault.i feel £10 is more realistic.
same as the charge VM laid on me for the late payment via the failed DD
however i stand by a £2.50 charge is too low. people would just not worry about meeting DD's etc
i think your death penaly analogy is a little extreme why do parking fines exist then? surely we should just be allowed to pay the parking we never paid if we get caught?

Nathan_Spleen

willo65 wrote: »

Why?

It costs Tesco about 7p for a tin of beans but they charge me 21p not 7p.

At least you get a tin of beans for your 21p.

I'd be interested to know what you think you get for paying £35 for your bank not paying a direct debit. Certainly not the 166 cans of beans you'd get from Tesco for it.