Charges despite DD being cancelled with bank

fishfacehappyface

Hi, I'm new to this so not quite sure if I'm posting in the wrong place.

My partner is self employed and has gone through quite a lean time recently due to the fact he was involved in a road accident in November (someone ran into the back of him) as a result of the accident he lost a 16 week contract as he was suffering with whiplash made worse by the fact he was run over as a teenager and had actually had his neck broken(!)

As he lost the contract and was unable to work naturally we found ourselves a bit short and changed over insurance policies and insured his work van and car on one policy (something we had been meaning to do for weeks but no got round to), the van insurance company then took it upon themselves to try and take payments from his account, calling them a 'severence fee', and they were pretty much the same as the rest of his policy! We were unaware they were going to do this so were suprised to recieve a letter saying he would be charged due to insufficient funds being in his account, spoke to the bank and cancelled the DD with them to stop them trying to take any more money, and also contacted the insurance company (Budget Insurance ironically!) and told them not to try and with draw funds from the account as it was empty.

However they have continued to try and take funds from the business account, despite the DD being cancelled, and every time they have tried to take funds and it has been rejected, the bank have charged us, and also the insurance company!!

As soon as he was able to return to work and secured a new contract my partner transferred enough money into the account to cover the amount the insurance company were trying to take, and we have been charged over £300 in DD unpaid fee's!! :mad:

Can they do this?? We were under the impresion that the DD guarantee meant you could cancel the agreement at any time and the company would not be able to apply to your account for funds, but the bank are saying they have every right to apply for the funds as we owe them the money. I have no issue with paying the insurance company what they say we owe (despite the fact we basically owed the rest of the insurance payments), but what about the late payment charges, are the banks allowed to charge us for a DD we have cancelled??

Premier_2

Perhaps a bit off topic for bank charges reclaiming. You'd probably get better advise as it essentially involves a dispute over cancelling an insurance policy.

The direct debit scheme is purely a method of the supplier collecting payment. Their collection does not mean they are entitled to collect it and your cancellation of a DD does not mean the supplier is not entitled to the money.
Whether the supplier is entitled to the money or not depends on the underlying contract, in this case for insurance.

There is an annual premium applicable to insurance contracts. This is usually payable in full in the case of a claim. If the insurance is otherwise cancelled mid-term, the insurer will apply their cancellation fees which may mean the insured still owes some money on top of what has been paid monthly.

You need to refer to the insurance details to see what is owed and if that is different to what is being claimed by the insurer, that is a dispute between the insurer and insured.

Now with regards the DD mandate, if the payer cancels the mandate direct with the bank, no future payments should be made and the bank should not charge the payer anything even if the Originator (the insurance company) subsequently tries to collect a payment.

But if the payer only informed the originator (and not the bank) to cancel the mandate, they may not have done so until the final payment had been collected.
This may cause a dispute again between the insured and the insurer.

The payer could always invoke the DD guarantee and get any money back from the bank (but that doesn't mean he doesn't owe the insurer the money)
Any such claim could also involve a claim for consequential loss (i.e. bank charges) but those consequential losses are not repaid immediately by the bank, but only once the bank gets the funds from the originator.

I would expect in this instance that the originator would make a counter claim to any indemnity claim under the DD gaurantee, as it appears that your partner may owe the insurance company the money.

This really should have been raised as a dispute with the insurance company, and whilst under dispute a hold placed on any collection.

The bank in this case are just the middle men stuck between two other parties involved in a dispute

fishfacehappyface

Hi, thanks for the advice!!

I think I need to make my question a bit clearer, I fully appreciate that my partner owed the insurance company the money, and we are relieved it has gone out. The question I was asking is can he claim the charges back from the bank due to the fact that we cancelled the DD with them originally??

Premier_2

Definitely.

If you cancelled the DD mandate direct with the bank, then the bank should not have made you pay any attempted collection after the mandate was cancelled. The cancellation is effective immediately.

Similarly, you should not incur any unpaid item fees. Unpaid item fees are for when you authorise a transaction but don't have the necessary funds to pay. If you've cancelled the DDI, you have not authorised the (attempted) transaction.

Contact the bank and find out their side of the story.

the_insider

The cancellation is effective immediately, providing the request is not being processed at the time. Banks usually recommend that you don't try to cancel DDs 5 days or less before the payment is due.

dunstonh

However they have continued to try and take funds from the business account, despite the DD being cancelled, and every time they have tried to take funds and it has been rejected, the bank have charged us, and also the insurance company!!

Cancelling the direct debit does not cancel the liability with the insurer. It just cancels the method of payment. The contract still remains in force. So, he still owes the money to the insurer.

The bank should check if the direct debit is cancelled before bouncing it due to insufficient funds instead of mandate cancelled. However, sometimes they slip through.

This is really straight forward for him and the bank to sort out as the bank will have the date on the system that the direct debit was cancelled. So, any fees incurred by bouncing the d/d after that date should be refunded.

davidgmmafan

"Banks usually recommend that you don't try to cancel DDs 5 days or less before the payment is due."

This maybe true but I have cancelled DD's the (working) day before a payment is due with Nationwide and Alliance & Leicester and it did not go out. Wouldn't have grumbled if it did like.

I agree this is straight-forward and should be easy to sort out. Unfortunately I have a funny feeling that there might be some patience needed as banks initial response if often no. Brush up on the DD guarantee as you may well end up dealing with a staff member who isn't too well up on it to put it mildly.