Direct Debit question please?

Petel

Greetings.
( Not quite sure where to put this post, so MOD please feel free to move it if required. )

Could anyone please advise as to the following?

In a recent discussion at my place of work, it was suggested that there are more than one type of Direct Debit. Can anyone confirm this please?

It was suggested that the consumer ( when agreeing to a DD ) may not be aware that there are more than one type and may not know which they are agreeing to.

The inference was that the other type ( if it exists ) is more onerous to the consumer, who only becomes aware of this when problems arise, such as the company or service provider suddenly and without warning, changing dates or amounts or when the consumer attempts to cancel the agreement.

I notice on another forum, posts where people have cancelled such agreements in the accepted manner, only to have the debits pop up again, having been reinstated by the company/service provider without recourse to the consumer and apparently, with the full co-operation of the consumers bank or Building Society.

Sorry for the long post but would welcome any input on this question.
Many thanks Petel

YorkshireBoy

Petel wrote: »

I notice on another forum, posts where people have cancelled such agreements in the accepted manner, only to have the debits pop up again, having been reinstated by the company/service provider without recourse to the consumer and apparently, with the full co-operation of the consumers bank or Building Society.

Google 'AUDDIS'.

zppp

Petel wrote: »

Greetings.
( Not quite sure where to put this post, so MOD please feel free to move it if required. )

Could anyone please advise as to the following?

In a recent discussion at my place of work, it was suggested that there are more than one type of Direct Debit. Can anyone confirm this please?

It was suggested that the consumer ( when agreeing to a DD ) may not be aware that there are more than one type and may not know which they are agreeing to.

The inference was that the other type ( if it exists ) is more onerous to the consumer, who only becomes aware of this when problems arise, such as the company or service provider suddenly and without warning, changing dates or amounts or when the consumer attempts to cancel the agreement.

I notice on another forum, posts where people have cancelled such agreements in the accepted manner, only to have the debits pop up again, having been reinstated by the company/service provider without recourse to the consumer and apparently, with the full co-operation of the consumers bank or Building Society.

Sorry for the long post but would welcome any input on this question.
Many thanks Petel

It is normally dependant upon the contract you sign with the company providing the service and taking the payment by direct debit. Some will contain a clause where in effect if you cancel a direct debit, they are authorised to reinstate the instruction or set up a brand new instruction against the account.

The direct debit guarantee is used where there is an error on either the bank or originator's part, and in this case where an error has occured the bank will claim via an indemnity for the amount taken and the harges triggered.

I suggest that you may want to have a look at the Direct Debit wesbite here for further information.

Petel

Many thanks to you both for the prompt replies.

Had already seen the Bacs site but was not aware of the " clause " situation. This may well explain the question. Will take a look at this AUDDIS thing as well.

Again, Many thanks.
Petel.

Mark_In_Hampshire

You've hit upon most of the failings and dangers of direct debit in one go.

It used to be the case that there were two types: fixed and variable.

Fixed was like a replacement for a standing order: a set amount on a set day of the month. Once set up, it couldn't be changed.

Variable means "unspecified amounts on unspecified dates". Clearly, that's advantageous for the payee and works better when the amounts are variable.

Now, as far as I am aware, only variable exists. For example, you could fill in a DD mandate form for BT's monthly payment plan and put the day of the month and amount on the form. You would then imagine that this will be set up as a fixed DD.

It won't. It will (IMO fraudulently) be set up as a variable one. The customer thinks that the payment will always come out for that amount on that date. That's not necessarily true. The payee can vary it (changes of amounts on the plan, weekends, bank holidays and so forth)

The protection for the customer used to be that the payee had to give 10 working days notification of the amount to be debited, so that any billing error could be corrected well in time before the batch is submitted to the bank.

That's gone now because it's "10 days or as otherwise agreed" - the otherwise agreed bit means the payee can ride roughshod over that and in practice (as with BT) does not in fact have to give you any particular notice period. They could, if so wished, post your bill online on day one and debit the money on day two - you agree this when you agree the payment method, because if you look at the DD mandate form you'll see the "as otherwise agreed" is in fact "UP TO 10 days" - note the subtlety of that change.

Finally, direct debit is fundamentally insecure. If I had your sort code and account number (just those, I don't need a PIN) I could set up dozens of DDs on your account and draw money from you (assuming I'm a limited company, which is the only bit of protection - consumers can't take DDs) as I wish. Jeremy Clarkson rather famously has some experience of this when he published his sort code and account number to make the point that people worry far too much and then found himself paying dozens of DDs people wilfully set up on his account to prove him wrong.

Since paper based DD mandates were abandoned in favour of paperless ones, the bank won't make any attempt to verify that you set up the DDs. They will simply hand your money out left right and centre to anyone who asks for it.

Interestingly in this case, although you can get the successfully taken DDs refunded, you can't get a refund on any bank charges if any should fail (since you were not excpecting the debits). The bank will send you to the payee and tell you it's their error, and claim they have no duty of care over your money. (As an aside, this is why I have DD disabled on my current accounts). The bank might refund, but they are not obliged to.

Following this, you can see that if you cancel a DD mandate with the bank, the payee can simply go ahead and set it up again. In this way, you could argue that the customer can never really cancel a DD mandate with any confidence.

I don't permit DDs on any of my accounts because IMO the scheme is fundamentally flawed, offers no real protection for the customer, and has been tipped so far in favour of the payee (which is who it's for - it's not for your benefit) that it is neither secure nor viable.

System

According to the FAQs at
http://www.thesmartwaytopay.co.uk/did-you-know.asp
Q: Can money be collected from my account after I have cancelled a Direct Debit Instruction?
A: No. The organisation would have to get your authority to reinstate a cancelled Instruction.

As I recall, when Jeremy Clarkson published his sort code, account number, and address, a mischievous person signed him up for a direct debit to a diabetes charity. Either the charity ignored the rules, and failed to write to Clarkson to confirm; or they did write, and Clarkson ignored the letter. In either case, if a direct debit payment was taken, Clarkson could have demanded and got from his bank an immediate refund.

When a wrong direct debit was taken from my account because a numpty at (then) Abbey keyed in the wrong account number, and didn't check that the account name was right, my bank did, of course, refund me. I did have to remind them that the guarantee is an 'immediate' refund, not 'tomorrow'.

If a mistaken direct debit fails because of lack of funds, then IMO the paying bank should refund any 'bounced direct debit' fee.

As a matter of curiosity, how do you bar direct debits from an account?

Mark_In_Hampshire

"The smart way to pay" (URL) - LOL

"The organisation would have to get your authority to reinstate a cancelled Instruction." is laughably weak. The bank won't check anyway, and nothing is done in writing.

If the system were in fact secure, this page:

http://www.bacs.co.uk/Bacs/Consumers/DirectDebit/HelpCentre/Pages/HelpCentre.aspx

would not need to exist; especially relevant is this sub-page:

http://www.bacs.co.uk/Bacs/Consumers/DirectDebit/HelpCentre/Pages/CancellationFailed.aspx

Q: I cancelled my Direct Debit and a further payment has been taken..

By the time Clarkson had received the letter, his bank account could have been emptied. More fool him for assuming that there are some safeguards in place to prevent this type of problem occuring in the first place.

The paying bank "should" refund the fee, but they may well argue it isn't their problem. The initial purpose of direct debit might have been to simplify payments, however the main purpose of the scheme is now to make money for banks.

You bar direct debits by calling the bank when one you never authorised pops up as a mandate and asking how it got there, having a minor row with the person who answered your call by taking umbrage at being called a liar by being told you must have set it up, then escalating it to a Manager and backing them into a corner verbally with a debate about whether they have a duty of care over your money

Gavin,_Clear_Academy

There is some truth and fiction in the responses above. So I shall try and make this as simple as I can:-

There is only 1 type of Direct Debit now supported, they are all variable.

Direct Debit is probably the safest method of payment there is as you are 100% protected by the guarantee.

Contact your bank if you believe you are owed a refund under the terms of the guarantee. If you have a valid claim you will receive a full refund straight away. If you believe the bank do not deal with this correctly then you can go to the financial ombudsman.

I am afraid all of the rules are not publicly available however the Direct Debit Guarantee is, you can check it out at the Clear Academy website, you can also contact me via the website if you need any further help.

Regards, Gavin.

Mark_In_Hampshire

Gavin,_Clear_Academy wrote: »

There is some truth and fiction in the responses above. So I shall try and make this as simple as I can:-

There is only 1 type of Direct Debit now supported, they are all variable.

So why do people like BT mislead you by sending you a direct debit form to fill in where you specify the date and amount, misleading people into thinking it's fixed because you're authorising what you wrote down, and then take it upon themselves to extend your authorisation of "X amount on Y date" to "any amount on any date"?

Gavin,_Clear_Academy wrote: »

Direct Debit is probably the safest method of payment there is as you are 100% protected by the guarantee.

Utterly hilarious.

Gavin,_Clear_Academy wrote: »

Contact your bank if you believe you are owed a refund under the terms of the guarantee. If you have a valid claim you will receive a full refund straight away. If you believe the bank do not deal with this correctly then you can go to the financial ombudsman.

The DD guarantee does make any stipulations on what is, and what is not, a valid claim. It seems to suggest the bank must give you an unequivocal refund without question, and to do so immediately.

So why do people get the run-around and have to push their point when the banks know full well they're obliged to refund?

Of course, if you didn't use DD, you wouldn't get into the position of having to go to an ombudsman just to get your own money back.

Gavin,_Clear_Academy wrote: »

I am afraid all of the rules are not publicly available

Doesn't surprise me.

Gavin,_Clear_Academy

Mark,

1. In the BT example the form that you sign to give your authority does not have any dates or amounts on it. BT may choose to offer dates however that does not form part of the Direct Debit Instruction. They are able to to change the amount or date provided they give you the correct amount of notice.

2. It is safer than any other payment method that I can think of any is the only payment method with a money back guarantee. Cash and cheques are very insecure and credit cards are prone to much higher levels of fraud. In the Jeremy Clarkson example it was the fault of Diabetes UK for not correctly undertaking their obligation to validate the identity of the individual as is a requirement of the scheme rules.

3. The Direct Debit Guarantee tells you that the Bank must give you advance notice of the amount and date that they will be taking the Direct Debit you then have the right to contact your bank and stop it before it is taken if you so wish. It also says that if they make an error you are entitled to a full refund.

If you use any other payment method you would have no right of recourse via the financial ombudsman.

4. The rules are not publicly available as it would then open the scheme up to potential abuse. I have a copy of the rules and can assure you that consumers are fully protected.

I will concede that some organisations do get it wrong however the scheme is not the problem and is specifically in place to protect you from these errors.

Regards, Gavin.

YorkshireBoy

Gavin,_Clear_Academy wrote: »

I have a copy of the rules and can assure you that consumers are fully protected.

It's generally thought that consequential losses, ie bank charges, are not covered by the DD guarantee.

Can you, and your 'manual', confirm whether this is indeed the case?

And how does one get ones credit file updated, other than by going to the FOS some 8 weeks later (after missing out on a re-mortgage deal and/or 0% credit cards due to the adverse information recorded)?