Penalised for inactive DD despite payment being timeous.

poet123

I recently did a BT to a Virigin card which had had a nil balance since Jan 2010. I set up a SO to make payment in time for the due date which Virgin received. I had forgotten there was a DD on the account but even if I had remembered I would have assumed that it would just be paid and so instead of one payment Virgin would have received two.

This morning we got a letter stating that the bank had refused the DD payment. I contacted the bank who say that after 13 months without being claimed any DD becomes inactive and that this is standard practice.

Virgin are saying that despite them receiving the timely payment by another means the mere fact that a DD was returned means they apply a £12 charge and we lose the 0% promotional offer.

How can this be fair? I could understand it and accept it if we had not made a payment but that is not the case. Surely, they know that a DD lapses after 13 months, and as we had already made payment (and the account was actually in credit by £25 prior to the BT and had been since Jan 2010) they should not have attempted to claim more money?

They say it is in the T&c'S but surely implicit in that is the understanding that the DD has been returned and no payment made by the due date, not just that they have claimed a DD? (which was not needed) That must be an unfair term or condition.

I have escalated the issue and am awaiting a manager callback.

Does anyone have any experience of this type of issue which could be of use to me in resolving this problem?

noh

Have a read of the second letter and its answer in this Telegraph personal finance page from 2007.
http://www.telegraph.co.uk/finance/personalfinance/2804961/Letters-to-Liz.html

"However, according to Bacs, the electronic transfer service responsible for direct debit collections, the rules do at least require the "originator" (in this case, Amex) to make sure that "a valid payment method" is in place if the dormancy period has expired. And, as the Ombudsman told you, it was up to Amex to apply for a longer dormancy period or to arrange for a new direct debit instruction to be set up."

It implies the originator (MBNA in your case) has a duty to ensure the DDI they hold is still valid.
They would have been informed by your bank when it was cancelled and should have then contacted you for a new authorisation.

poet123

Thank you for that, it gives me a starting point in that although Virgin say the DD is still active on their system they should have known that 13 months is the period after which it becomes inactive and informed me, and that the responsibility rests with them not my bank.

I have tried to google a copy of the BACS rules but most sites that have them need membership, any ideas where I can get a copy from so that I can refer to the relevant rule?

noh

I believe that the originator is informed electronically of the cancellation of the DD via Auddis .
MBNA will almost certainly be using the system as it is a requirement for paperless DDs.
The most likely scenario is that they did receive notification of the cancellation but did not record it or take any action.

The rules of BACS/DDs as you say do not appear online to the general public.

There are other posters on these forums who work in financial organisations and are familiar with the workings af the DD system and AUDDIS. One of them should be able to give you more help.

If you don't get anywhere with MBNA it is worth contacting the FOS for advice as did the letter writer in the Telegraph atricle.

poet123

Thanks, they would not have bothered to inform us because there was a nil balance on the account. However, as the account was still live and they issued new cards the onus is still surely on them?

As payment had already been received, this is a blatant attempt to get out of the 0% interest free period, and if I get no satisfaction I will certainly go to the ombudsman.

Hopefully, someone else will be able to point me in the direction you suggest. Thanks again.

YorkshireBoy

poet123 wrote: »

Hopefully, someone else will be able to point me in the direction you suggest.

Contained within noh's link above is a reference to ADDACS, which is the mechanism for the bank notifying originators that a DDI has lapsed (due to the dormancy rule, which, incidentally is not always 13 months or 400 days...each bank is free to set their own dormancy period).

Ask MBNA why they didn't take action on the ADDACS file sent to them by your bank.

If they say they didn't receive it, ask your bank if they sent it.

Your best point of contact at MBNA is the customer loyalty team on 0800 783 1116 (during office hours).

oscar52

YorkshireBoy wrote: »

Contained within noh's link above is a reference to ADDACS, which is the mechanism for the bank notifying originators that a DDI has lapsed (due to the dormancy rule, which, incidentally is not always 13 months or 400 days...each bank is free to set their own dormancy period).

Ask MBNA why they didn't take action on the ADDACS file sent to them by your bank.

If they say they didn't receive it, ask your bank if they sent it.

Your best point of contact at MBNA is the customer loyalty team on 0800 783 1116 (during office hours).

TBH, I wouldnt go to Customer Loyalty. Wait for your manager call back, and if not resolved or not happy, call Customer Advocates Office on 0800 085 1409 (option 0 I think).

Most people on the "floor" (I am assuming this was a phone call) are unaware of AUDDIS rules/regulations. It is a simple check on the system to see when the last payment by DD was - and if it was 11/12 months ago, they should have been looking to set up another. This is a failure by the rep of the company in my opinion, and in nearly all cases of this nature, I have seen the fee refunded and the interest free returned, providing the customer alerts the bank immediately as you have done.

chattychappy

I think DDs are more hassle than they are worth. So many ways they can go wrong.

I can understand you might be charged for a failed DD, but I agree it is unfair if you had met the minimum by another means and despite that they withdraw the offer. I'm afraid you will have to check the T+Cs and terms of the offer - but from my memory the offers are subject to your not breaching T+Cs and T+Cs don't actually say DDs cannot fail, only that you must pay the minimum by the time due. I would ask them specifically WHICH T+C they are relying on, then we can decide how to argue.

Good luck. Personally I don't think this is an issue of the technicalities of how DDs work. Just a matter of what you agreed to and if it's enforceable.

poet123

Thank you all so much for this info. It gives me a position to argue from.

I wonder if my bank did send the notification though, as when I initially asked the CS agent there she said DD never expire! it was only when she checked with her manager that she discovered there was a dormancy period.

YorkshireBoy

chattychappy wrote: »

I would ask them specifically WHICH T+C they are relying on, then we can decide how to argue.

They will probably be using condition 3a (2nd bullet)...

"£12.00 each time we return a credit card cheque unpaid and each time a direct debit, cheque or other item for payment into your account is unpaid.

However, the first sentence in condition 3a says...

"3a If you break this agreement, you must pay the following default charges."

OP,

Now since you actually made a payment on time you haven't technically breached the T&Cs...and this should be your negitiating stance.

Did you read my post above? I've had several M&S cards (obviously not run by MBNA but bear with me), and all paid by DD from various bank accounts (Halifax, Yorkshire Bank, and NatWest). Each time I've cancelled a DD with my banks (at the end of a 0% promotion) M&S have wrote to me informing me that my DD has been cancelled. So there's your proof that the ADDACS system is alive and working. Use that, as I said above, in your dealings with MBNA.

You will get your money back, and the 0% promotion, but you'll have to fight (politely) to get it.

Good luck!

poet123

Thanks, so you would argue that the term"default" refers to a payment default not the default of the DD per se? Hence, the terms and conditions have not been broken.

Are those the MBNA t&c's?