Virgin Credit Card: balance cleared, direct debit cancelled and charged a default fee

Skellers

I have a Virgin Money MBNA card. I had previously set up a direct debit with Virgin to take the minimum payment every month and I also paid more into the account manually online. I set the DD up so I was sure to make the minimum payment and not default by forgetfulness, etc. I was given to believe that the amount taken varied, depending on the amount of the balance remaining.

I have recently paid off a large chunk of the balance and transferred the rest to my Barclays card (they offered me a 0% interest balance transfer). That left the Virgin card with a zero balance. I cleared the whole balance 2 weeks before the direct debit was due. I cancelled the direct debit assuming that a notice would be sent to Virgin telling them of the cancellation and made the reasonable assumption that they wouldn't be taking anything any more because the balance stood at zero. Virgin have tried to take £25, despite the balance being cleared 2 weeks beforehand. They have charged me a £12 default fee and £7.84 interest. Upon calling them, they told me they refused to write this off as it was my fault. I asked them why they were taking £25 when I owed them nothing and was told I should have let the DD go and then called them to request a refund. How can it be right for them to take £25 that I don't owe them?

I have written a complaint to Virgin asking them to reimburse me as this is clearly unfair. I wrote to them on 12th July and have only just received a letter from them saying they will respond in writing by 10th August. In the meantime, they have sent me a statement telling me to pay the charge and interest by 1st August. I called them to ask about that in light of their other letter and was told if I didn't pay it, they would charge me further. Left with no other option and not wanting to be charged/have my credit rating affected any further, I have paid it. I am astonished by the unfairness of the whole situation. I plan to complain to the Ombudsmen if Virgin do not change their position.

What worries me is that I am looking to move house and get a new (bigger) mortgage. I am concerned this will go against me when I finally sell my house and find a house I want to buy. I have been credit checked with a mortgage broker before this happened and was told the bank (in this case Natwest) would lend to me. I fear the position might now have changed because of this situation. Any assistance or advice appreciated.

Em1975_2

I would advise anyone to stay away from Virgin Credit cards - their initial interest rates are great but once you move off the intro rate the minimum payments go sky high!! All i seem to be paying off mine is interest.....on top of this they increase the balance every few months to enourage you to spend more.
Tell them that you want your complaint escalating to a manager and threaten them with the FSA - that should get them moving!

staffie1

I have to agree wholeheartedly with em1975 - virgin credit card is evil - they seem to do all they can to shaft you with interest and charges whenever they get the slightest opportunity - moving the goalposts all the time and just waiting for you to fall into the trap.

I wonder whether in this case the £25 represents some residual interest accrued between the previous statement date and the point at which you paid that lump sum off your balance? I often find that there's always a few quid in interest charged after the balance has been cleared, which after it's paid, then clears the account altogether. Just a thought, not necessarily the case with virgin - as per my opening remarks.

I think you're right to complain and ask for charges to be refunded and no adverse report on your credit record. You never know, you might just get through to someone at virgin who gives a toss...if you're lucky!

chattychappy

Skellers wrote: »

....
I have recently paid off a large chunk of the balance and transferred the rest to my Barclays card (they offered me a 0% interest balance transfer). That left the Virgin card with a zero balance. ..

Er... maybe it didn't. What about the interest between your last statement balance and when you paid off these chunks?

Did you then get statement showing this (trailing) interest and the minimum payment due?

I agree it is odd if they tried to take the DD for £25 if this was more than the amount outstanding... but perhaps this was already in the pipeline when you paid off the balances. Also the £12 might have been for the refused DD, rather than a default.

fozmcfc

Interest is usually payable daily, so if you pay the whole balance off 2 weeks before there might have been a few days worth of interest, possibly only £1 or £2 pounds to pay the following month. If this isn't the case then I think the OP has cause for complain.

So for example, I owe £512 on my Natwest card. The statement was issued 5 days ago, so 5 days of interest will be payable on £512. If I paid today £512, I would still have 5 days of interest to pay the next month. If I didn't pay that then I would incur a default that month or certainly the next month.

As for Virgin, well we all know that after the 0% BT period is up we are going to have to pay interest, so it's unfair to say on that basis avoid Virgin.

What does seem to happen though is that the customer is unlikely to get near the quote typical apr rate, as Virgin will be after making some of the money back they haven't had out of the customer in the previous 16 months of free interest.

The only thing people like us can do is sort out another 0% balance transfer card 6 - 8 weeks or so before the APR is going to kick in.

Skellers

Forgot to mention, it was an interest free balance - I had transferred it in from another card (card tart) so I didn't owe them any interest either - that is for sure.

noh

You received a bill notifying you of the amount of the direct debit to be taken.

If you had read the section on the rear of the bill entiled "Making a payment" you would have seen the following words:-
"Your Direct Debit payment will be taken regardless of any additional payments you make......."


You cancelled your DD. MBNA were unable to collect the £25 so you were charged £12 for a failed DD.
They have done exactly what they said they would do in the T&Cs.

If you had called them before cancelling the DD and notified them of your intentions they would not have attempted to take the DD and you would not have been charged.

Skellers

I believe the charge was for the refused direct debit, but I didn't owe them anything on the balance, I didn't owe them any interest as it was an interest free period, balance was cleared 2 weeks before direct debit would have been taken otherwise, so no reason for them to take £25 as far as I can see?! £25 puts the balance in credit. Notwithstanding that, other advice on these boards is that when a DD is canceled, the bank sends the originator a notice saying it has been canceled......

olly300

Skellers wrote: »

I believe the charge was for the refused direct debit, but I didn't owe them anything on the balance, I didn't owe them any interest as it was an interest free period, balance was cleared 2 weeks before direct debit would have been taken otherwise, so no reason for them to take £25 as far as I can see?! £25 puts the balance in credit. Notwithstanding that, other advice on these boards is that when a DD is canceled, the bank sends the originator a notice saying it has been canceled......

I agree with you as you left plenty of time.

Quote The Unfair Terms in Consumer Contract Regulations 1999 as a large company that gets accounts credited and debited all through the month they are not acting in "good faith". And ask for a refund, if they refuse then make it more formal and don't be afraid of dragging them all the way to the FOS.

Moggles_2

The effect of a manual payment, when a direct debit is active on your account, varies between lenders, so we all need to make sure we understand what happens to the DD if we make additional payments.

The variations I have encountered are:
1) The direct debit is recalculated if a payment is made at least x days before the DD is due [eg. Capital One, Egg, Lloyds Tsb]
2) If a manual payment is made, regardless of the amount, no money is taken by DD that month. [eg. Barclaycard]
3) No account is taken of any payment made. The amount specified on the statement is automatically collected by DD unless instructed otherwise [eg. Co-Op, MBNA (which operates Virgin), RBS].

If you forget to notify MBNA before cancelling a DD, they'll attempt to take it and you'll be charged.

Virgin has done nothing wrong as far as I can see.

Sportbilly_2

I had a similar situation with them this month. I paid off my balance at the start of July and rang up and asked to cancel my card. Luckily, I didn't cancel my direct debit as I thought they'd do that or at least have the sense to not take a payment, and £25 got paid on the 24th, 3 weeks after I'd cancelled the card. I rang them up and they were happy enough to give a refund, but your situation is ridiculous.

Fair enough if you've paid some off and they take the DD as well, but regardless of the T&Cs, if your balance is zero, they shouldn't be taking a payment.