Minimum payment direct debits not collected - a scam?

bazster

A few months ago, I took out a Post Office credit card because I was going on holiday and it doesn't incur transaction charges when used abroad.

I've had lots of credit cards over the years, and I always pay off in full at the end of each month. Well, almost always, because once in a blue moon I simply forget to pay the bill. So, I always set up a direct debit to pay the minimum, so I can at least avoid the penalty for paying late.

I did the same with the Post Office card and, because direct debits take a while to become operative, I dutifully paid the bills "manually", in full, until I received a statement stating that the minimum payment would be collected by DD. I then "manually" paid the full amount, less the minimum payment.

But, they never collected on the DD. Result? Balance not paid in full, and a hefty interest charge. During a lengthy correspondence (obviously designed to grind me down until I gave up) they tried to rely on this utterly meaningless wording on the statement: "Direct debit will normally reflect other payments received."

Eventually they realised that I wasn't going away, and that a complaint to the Ombudsman loomed, so they admitted that the statement wording was unclear and refunded the interest.

So far so good. But today I opened a Barclaycard statement to find that, guess what, they had not collected on a DD either! Same result: statement not paid in full, so hefty interest charge. This particular card I've had for a long time, they've always collected the minimum-payment DD before, and this one has no vague could-mean-anything wording on the statement. So, no excuses, and I await their response to my demand for my money back.

In conclusion: after years and years of making minimum payments by direct debit and without problem, I have now encountered the same non-collection issue twice within a few weeks, and on two different cards, each time to my significant financial disadvantage. Could it be that the credit card companies have thought up a new scam to part us from our money, in the hope that most of us will not notice? Could they really be that dishonest?

rsykes2000

I can't comment on the non-collection of DDs as I know nothing about that (but it does sound decidedly dodgy), but why not get the DD set up to pay it off in full ? I know at least some companies offer this, yours might do as well ?

terryw

I think that if a dd has not been used for twelve months then it can't be actioned and a new dd needs to be set up.

bazster

rsykes2000 wrote: »

I can't comment on the non-collection of DDs as I know nothing about that (but it does sound decidedly dodgy), but why not get the DD set up to pay it off in full ? I know at least some companies offer this, yours might do as well ?

Thanks for pointing this out. Yes, they do offer this, but if I've forgotten to make the payment then I may also have forgotten to make sure there are funds in my current account. I'm happy to make the minimum payment by DD, but I want to be in control of the larger sum leaving my account. I've only ever forgotten once or twice in many years, so it's not much of a problem, at least it wasn't until this issue with the DD's reared it's head.

bazster

terryw wrote: »

I think that if a dd has not been used for twelve months then it can't be actioned and a new dd needs to be set up.

As I said: (i) one of the cards was new so it was a new DD (ii) the other card is in regular use and the DD gets exercised every month and (iii) both statements clearly stated that the minimum payment would be collected by DD.

Ritchie74

Sorry but many banks do not take a DD payment if you have already paid the minimum for that statement cycle. Imagine if you had made a manual payment in full, would you be happy for the lender to still take the minimum requested? Even if you would be ok with this, many customers would not. By making a manual payment you are effectively overriding the DD pull.
This has been the case across many banks for quite some time and I doubt you will get anywhere with the Ombudsman. Put it down to experience and pay in full in future to avoid any interest charges.

choc_mouse

bazster wrote: »

(iii) both statements clearly stated that the minimum payment would be collected by DD.

Yes, and all my statements also say:

bazster wrote: »

"Direct debit will normally reflect other payments received."

The OP is right in that this is a bit vague but with experience, I understand it as follows:

Credit card companies normally offer direct debit options. I have seen:
a) Direct debit for minimum payment amount
b) Direct debit for fixed amount (greater than minimum amount)
c) Direct debit for full statement balance

Option (a), the credit card company will ensure the minimum payment is paid so you don't get any missed payment fees and a black mark on your credit record. So if you've done a manaul payment that's equal to or above the minimum payment, they won't need the direct debit for that month because the minimum payment was satisfied. If you made no manual payment or it was lower than the minimum payment, they will take the [minimum payment] minus [manual payments] by direct debit. If there is still an outstanding balance, then you will be charged interest on it which is what the OP is complaining about but I think this is standard industry practice.

Option (b) is similar to option (a) except that you pay a bit more every month so that you pay off your debts quicker.

Option (c): Say your statement balance was £1000 and you had set up a direct debit for the full payment. If you made a manual payment before the payment due date, say of £400, then the credit card company would take £600* from you by direct debit on the payment due date. If you don't make any manual payment, they will take the full amount (£1000) by direct debit. This ensures you have no missed payment fees and no interest charges. Only use this option if you have the money in your current account - you don't want to get unauthorised overdraft charges or failed direct debit fees.

I'm sure the majority of card companies will operate this way BUT always remember to read the specific terms and conditions you are signing up to. It takes maybe 15 minutes but you'll save the time and hassle for making any mistakes in the future.

In summary for direct debits: the credit card company will ensure you have paid AT LEAST the agreed amount by the payment due date, be this automatically through direct debit, manual payment by yourself, or a mixture of both.

I don't see anything wrong with what the Post Office or Barclaycard has done as described by the OP and agree entirely with Ritchie74.

*Note, this is my experience I have with LTSB, Nationwide, Natwest and Post Office (yet to experiment with Santander). I've heard stories where, even if you made a manual payment of £400, the CC company still took £1000 (full amount) by direct debit taking your account to +£400.

bazster

Ritchie74 wrote: »

Sorry but many banks do not take a DD payment if you have already paid the minimum for that statement cycle.

I have never encountered this before with the many credit cards I have had over the years. They have all taken the DD regardless of whether I have made full or partial payment by other means.

If this is not how the Post Office (or, more accurately, Bank of Ireland) works, then they should have said so clearly. As it is, the statements read:

"Your bank account will be Debited by the Minimum Payment Due on or after <date>." Full Stop. This is clear and unequivocal, it is not qualified by "unless" or "except", and they did not do it.

They claimed that they were covered by the additional wording "Direct Debit will normally reflect other payments received", but that statement is so vague as to be utterly meaningless. There is nothing else i.e. there is nothing in the contract that concerns this.

In the case of the Barclaycard, I've had this card for years and they do not operate in the way you describe, they have always taken the DD regardless of any other payment I have made, as with every other card I've ever had.

Ritchie74 wrote: »

Imagine if you had made a manual payment in full, would you be happy for the lender to still take the minimum requested?

Yes.

Ritchie74 wrote: »

This has been the case across many banks for quite some time and I doubt you will get anywhere with the Ombudsman.

I don't need to go to the Ombudsman, at least not in respect of the Post Office. As I said, they have accepted that their wording was at fault, and they have refunded the interest. Had I gone to the Ombudsman I may well have succeeded for the same reason, but if not (and the Ombudsman can be pretty spineless) my next stop would've been small claims court, where I haven't the slightest doubt that I would've won on the grounds that they said they would do something (collect the payment) and then didn't. It's no defence to point to an utterly meaningless sentence and claim that it means something.

As for Barclaycard, they are so manifestly in the wrong that I expect it will get nowhere near the Ombudsman, but if it does I have no doubt I shall win.

Ritchie74 wrote: »

Put it down to experience and pay in full in future to avoid any interest charges.

I guess you are only trying to help, but it's astounding how many people on these forums would give up so easily when being messed around by businesses. It seems to fly in the face of everything that the MSE is about. If I had "put it down to experience" then the interest the Post Office took from me would still be propping up their tottering empire instead of being where it belongs, nestling comfortably in my bank account. You may be happy for businesses to take money from you to which they are not entitled, but I fight back.

Hazzanet

I've found it varies company to company; Nationwide and Lloyd's TSB would cancel or vary the direct debit reflecting any payments received at least three days before the due date, whereas Co-operative and Tesco/RBS still take the minimum and effectively put you into credit on the account.

It's always best to ask the question when you set the DD up as to how manual payments made before the DD cycle starts will affect the amount collected, if at all.

bazster

choc_mouse wrote: »

The OP is right in that this is a bit vague but with experience, I understand it as follows:

Exactly, it's vague. In fact, it's meaningless. If you need to consult goat's entrails in order to understand what some wording is trying to tell you then it has no legal standing whatsoever.

choc_mouse wrote: »

Option (a), the credit card company will ensure the minimum payment is paid so you don't get any missed payment fees and a black mark on your credit record. So if you've done a manaul payment that's equal to or above the minimum payment, they won't need the direct debit for that month because the minimum payment was satisfied. If you made no manual payment or it was lower than the minimum payment, they will take the [minimum payment] minus [manual payments] by direct debit. If there is still an outstanding balance, then you will be charged interest on it which is what the OP is complaining about but I think this is standard industry practice.

If this is standard industry practice then, by some amazing coincidence, I must at some stage or other have held every credit card there is that does not conform to it, and none of those that do. In any case, "standard industry practice", whatever it might be, is not binding on me or any other customer, what matters is what the bank has specifically said to me.

choc_mouse wrote: »

I'm sure the majority of card companies will operate this way BUT always remember to read the specific terms and conditions you are signing up to. It takes maybe 15 minutes but you'll save the time and hassle for making any mistakes in the future.

I have read the T & C's, they are silent on the matter of direct debit payments.

choc_mouse wrote: »

I don't see anything wrong with what the Post Office or Barclaycard has done as described by the OP and agree entirely with Ritchie74.

Then you haven't been paying attention.

choc_mouse

Without sidetracking and getting into pointless forum arguements....

I hope it's clear now that the policy varies by credit card company. If the T&C's don't detail it, then ask your branch or call customer services in advance of the payment date.

In my case, I've found that LTSB, Natwest, Nationwide and the Post Office work in the way I described and I find this perfectly acceptable, along with many other customers I presume. Hazzanet also pointed out, Co-op do it slightly differently. I have no idea about other organisations.