Direct Debit question please?

saf87

davidgmmafan wrote: »

So in other words if the scenario I offered occurs, where one erroneous DD scuppers all the rest you'd best pay some money in pronto to avoid the resulting snowball of charges.

Yes, although you would expect any decent bank to reverse such charges.

I can’t see any reason that the ombudsmen would have not to uphold a complaint on such grounds. Especially given that a mechanism exists for the bank to help its customer recover the charges from service user.

System

saf87: Many thanks for posting the scheme rules on consequential loss. I agree that the direct debit guarantee does not, of itself, require the paying bank to make an immediate refund of consequential loss. However, in the case of a charge for bouncing an erroneous direct debit, any bank that cares about its customers would make an immediate refund, pending the resolution of any claim the bank makes against the service user. The apparent implication in the scheme rules that the bank is pursuing the service user on behalf of the customer is IMO wrong in law: in the case of a debit from a mistaken account number, the customer has no contractual relationship with the service user.
Note particularly the instructive case of Mr M, described by the Ombudsman here:
http://www.financial-ombudsman.org.uk/publications/ombudsman-news/27/27-directdebit-guarantee.htm
Mr M got, of course, a refund of fraudulent direct debits. At first, the bank refused him consequential loss of interest on his savings account.

In this case, as Mr M had not authorised a direct debit, the direct debit guarantee was not strictly relevant. However, after we [the Ombudsman] discussed the position with the firm [ie the bank], it offered Mr M a goodwill payment to cover his consequential losses.

'Goodwill payment' is IMO mere face-saving. Mr M would have had a sure claim against the bank for negligently paying out sums he had not authorised, including a claim for consequential losses.

Mark_In_Hampshire

Why would the bank go after the originator for the charges, when they can simply deduct them from the customer's account and fob the customer off?

If it's genuinely the case that there is some clawback mechanism, that ought to be part of the DD guarantee.

However, if it were, it would simply expose just how insecure the system is.

Mark_In_Hampshire

PJwashere wrote: »

Tally-Ho's response reminds me of shopping in small shops. A lot (mainly Asian ones - no I'm not being racist, it's simply a fact, go to several and several non-Asian ones if you don't believe me) charge for using a credit/debit card. Now I know there's a fee anyway (big chains generally include it in the price - which makes it unfair if you pay by cash as you don't get a discount for doing so) that the retailer has to pay, but shops have tried to charge from 50p up to close to £2 just for my using a debit card! In which case, unless I don't have much choice, I simply walk out or buy less stuff with the little cash I have in my pocket.

Same goes for shops that don't accept cards at all (unless they're otherwise really good shops - e.g. very friendly and helpful).

With the one that wanted to charge me close to £2, I simply walked to Netto, bought a cheap packet of biscuits, got cashback, and instead of returning to the shop decided to give my custom to another shop.

As an aside, generally when a retailer opens an account and gets a merchant number to take card payments, they enter into an explicit agreement with the provider that all transactions will be "at face value". The retailer is in breach of their agreement by levying a fee for card payments. Should that retailer be reported to e.g. Barclays PDQ, Streamline, etc (hint hint) they could find their merchant account revoked.

The retailer is charged a fee but even when I took cards years ago that was only something like 10p per debit card transaction and 4% per credit card (internet consultancy including hosting which is viewed as high risk, so those are high fee examples).

If the retailer doesn't want to pay the fees, they don't take the cards. In my case I had credit cards disabled (mostly high value transactions) and only took debit cards.

If you wonder how travel and booking agents get away with it: they're big enough to have an exemption clause.

Companies like IKEA are big enough to simply get away with it.

PJwashere

YoungNick wrote: »

According to the FAQs at
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?

Not so sure about what you said about Clarkson. When I was a street fundraiser (lasted hardly any time as it's like telesales), one guy refused to sign up because he'd previously had a direct debit with a charity, cancelled it for whatever reason, and the money kept being taken out and the bank would do nothing about it.

P.S. found this: http: // www . financial-ombudsman.org.uk/publications/ombudsman-news/38/standing-orders-direct-debits-38 . htm

'Usually, the customer has to sign a direct debit form, although some particularly trusted originators are authorised to set up direct debits where the customer has given authority over the phone. If that sounds a little risky, remember that the originator must have obtained the bank account details from the customer – and that the customer is protected by the direct debit guarantee.'

PJwashere

Mark_In_Hampshire wrote: »

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

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

Judging from that link, which has an 0870 number which can clearly only be for making money from the customers it's supposed to be protecting, you can't do much if a bank refuses a refund. After all, you'd have to pay a massive phone bill (or pay even more money from a payphone or mobile) to try to get your money back!

PJwashere

Gavin,_Clear_Academy wrote: »

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.

Just to respond to the rubbish about it being safe:

See above posts and:

Standing order is much safer.

Also internet is screwing up on the computer I'm using so can't check, but standing order was mention on link in my above above post, so I think you do have right of recourse through financial ombudsman with standing order. And how is cash not safer? You control exactly how much you pay and when!

And the rules are not publicly available because customers knowing what their rights were would compromise the scheme. Bull and something I can't say on this forum. Yet you have a copy of these rules? You definitely have a vested interest in promoting the scheme.

davidgmmafan

In fairness to IKEA they charge 50p, at least that's what I remember. This may bear some relation to thier costs, £5 a time which is what Virgin, Ticketmaster and some airlins charges is ridiculous profiteering IMO.

A little off topic I feel but relevent, esp if a customer incurs such 'service fees' because they are wary of the weaknesses in the direct debit scheme discussed here. What are our great leaders doing about it? Not a lot as far as I know.

I've always been bemused why the banks are even allowed to charge fees for returned direct debits. If its not paid that's between the customer and the company, the bank is just the (greedy) middleman.

Oh and one last thing when the topc of charges come up and people moot possible alternatives to the current model as charges per transaction imagine the chaos if people reverted to cash and didn't use DD unless they could possibly avoid it. Pity the poor banks queues and loss of charges revenue

Mark_In_Hampshire

Most companies these days charge ridiculous figures for not paying by DD simply because they don't want your custom. Or, if they have it, then they benefit from it financially, as you state.

In Ireland, charges for alternate payment methods are not permitted - the amount charged must be the face value regardless of the means of payment.

My initial conversaion with BACS was started due to the frustration of companies insisting on "pulling" funds when there is presently no safe method of doing that.

Because people are generally gullible and/or naiive (about two thirds of people do or will use direct debit) and don't look too deeply, the system has grown up as it is.

On a conspiracy theory note, one option being looked at now is the possibility of wages being paid by the Inland Revenue (employer credit them, they credit you). That then opens up the possibility of "direct debit at source of funds" otherwise known as "attachment to earnings" which you would then have to accept in order to get e.g. utilities, and it would make it very difficult to be self-employed.

I can confidently predict this will be sold as a benefit to the customer ("never miss a payment!") and that most people will blithely accept this and agree that it's a good idea.

Petel

Hello All.
Have passed on the information provided re D/D's and AUDDIS to the interested parties at my place of work. Most, like myself, were unaware of the AUDDIS system and its ramifications, for some this was a real eye opener.

All agree, that they now have a greater and more current awareness of the D/D situation and offer thanks to all who contributed to this thread, although it now appears to have moved on past my original question.

Many thanks again, Petel.