Direct Debit Guarantee in case of dispute

6am

Had a lovely chat at the bank. The bank initially refused to return direct debit payment. My point was that because it is a direct debit payment they should return money immediately and do not ask any questions. After about 2 minutes of arguing they agreed to return money but said that the organisation can refuse to return the money and then they will take the money back from my account. I was trying to point that it will be an unauthorised transaction and if the organisation disputes the return of payment they should approach me directly.

I am not sure what happens in case of dispute therefore I went to Direct Debit Guarantee website to see what they say about disputes. The information is vague. According to http://www.directdebit.co.uk/DirectDebitExplained/Pages/DirectDebitGuarantee.aspx

• If an error is made in the payment of your Direct Debit, by the organisation or your bank or building society, you are entitled to a full and immediate refund of the amount paid from your bank or building society
  • If you receive a refund you are not entitled to, you must pay it back when the organisation asks you to

Say I requested a refund. I should get an immediate refund. What happens next behind scenes? I envisage two scenarios.

Scenario 1
- bank claims the money from the organisation
- organisation cannot refuse the return of payment under direct debit guarantee therefore they return money to the bank
- organisation believes I owe them money therefore they ask me to pay, I refuse, they sue me

Scenario 2
- bank claims the money from the organisation
- organisation refuses the return of payment
- bank takes the money back from my account
- I believe that organisation owes me money therefore I ask them to pay, they refuse, I sue them

Which one will happen?

P.S.
I need to write a complaint. The bank should spend some money on staff education. They should not argue about returning direct debit at all.

rb10

Sorry, I don't know the answer to your main question, but ...

6am wrote: »

P.S.
I need to write a complaint. The bank should spend some money on staff education. They should not argue about returning direct debit at all.

No. The bank does need to know the reason for your request, and verify that it is indeed permitted under the DD Guarantee, before they are able to refund the payment.

meer53

Why were you asking for the Direct Debit to be returned ?

anna42hmr

Hi

when a direct debit is disputed under the guarantee the bank will need to ask you why as advised by rb10 as they need to ensure it is something that is covered

see this under uk payments council site
http://www.directdebit.co.uk/DirectDebitExplained/Pages/DirectDebitGuarantee.aspx





Direct Debit Guarantee

• The Guarantee is offered by all banks and building societies that accept instructions to pay Direct Debits
• If there are any changes to the amount, date or frequency of your Direct Debit the organisation will notify you (normally 10 working days) in advance of your account being debited or as otherwise agreed. If you request the organisation to collect a payment, confirmation of the amount and date will be given to you at the time of the request
• If an error is made in the payment of your Direct Debit, by the organisation or your bank or building society, you are entitled to a full and immediate refund of the amount paid from your bank or building society
  • If you receive a refund you are not entitled to, you must pay it back when the organisation asks you to
• You can cancel a Direct Debit at any time by simply contacting your bank or building society. Written confirmation may be required. Please also notify the organisation.

so if you don't meet the above then you don't qualify for a refund, if you do claim a refund as advised by the above it doesn't remove your obligation to pay.

a few years back I had to make a claim as a gym whos membership I had cancelled (and received confirmation of that the contract had ended) took an extra dd payment that wasn't owed.

when I made the claim, even though I provided my bank a copy of the confirmation from the gym the contract was ended and the date of the last payment, I did have to agree that if the dd refund is disputed then they would be able to debit the account

Effectively the bank pays you the money then claims back from who ever claimed the dd, and if they don't pay back and can prove that the payment was/is owed, the bank can take the money back again.

At the time of the refund it is the bank who has paid you and its the banks money you have - if the other co show money is entitled and wont pay the bank, why should the bank give you there money to keep after the claim has been declined. That is why the would tell you that they can claim the money back from there account as the money isn't from the company that has taken the direct debit, its the banks.

It is the same with a debit card payment, if for instance a claim is made that a transaction was fraudulent and the company isn't owed the money then they will reclaim the money from the account if it is shown otherwise.

System

Under the direct debit guarantee, your bank must make an instant refund if you say that a direct debit was not authorised by you. The bank is not entitled to ask you any questions. However, because of an inconsistency in the inter-bank procedure, your bank wants to tell the claimant's bank why you have refused payment (by general codes, denoting for example 'no instruction at all', 'wrong amount', or 'wrong notice'). Just to be helpful, you may wish to tell your bank enough to enable it do this.
If the claiming organisation believes that you do owe it the sum it was claiming, this organisation can of course pursue you for payment, or try to take the direct debit again. Meanwhile it has to indemnify your bank, via its bank.
There is an arcane procedure for the organisation's bank to claim back from your bank a refund of this indemnity, if the organisation can prove to its bank that it was in the right. It is unclear when and how this can be invoked, and what right (if any) your bank then has to debit you again.
If your bank wishes to assert that you did authorise the payment, the onus is on your bank to prove this: BCOBS 5.1.11.
http://fshandbook.info/FS/html/handbook/BCOBS/5/1
See also the Ombudsman's remarks, especially case 27/1.
http://www.financial-ombudsman.org.uk/publications/ombudsman-news/27/27-directdebit-guarantee.htm

6am

Short answer:
An error has been made in the payment of direct debit and I would like a full refund.

Long answer:
I bought an insurance but decided to cancel it before the end of cooling off period. I notified the company. I did not cancel direct debit instructions believing that the company will not take the money. However they did. I did not make any claims during cooling off period therefore I am entitled to cancel the insurance contract without any financial repercursions. By taking the money from my account the organisation made an error. I am entitled to a full and immediate refund from my bank of the amount paid.

How does the bank staff knows anyway if the reason I give is a valid reason. I believe they made an error therefore I request the refund. Bank does not have any information about my relationship with the company. How can they judge if the reason is valid one or not? They are third party.

Hazzanet

6am wrote: »

Say I requested a refund. I should get an immediate refund. What happens next behind scenes? I envisage two scenarios.

1. The bank refunds you out of its DD Indemnity Claim (DDIC) Suspense Account.
2. A DDIC form is forwarded to the bank's BACS department.
3. The Bank's BACS department completes necessary computer input to raise the DDIC against the Service User (Originator).
4. Next working day, Service User receives a DDIC report from BACS stating reason for DDIC and when the amount will be automatically reclaimed from their bank account (normally 14-21 days).
5. Service User has 14 days to lodge a counterclaim (e.g. against a fraudulent/spurious claim).
6. If counterclaim is raised & successful, the DDIC is reversed and reclaimed from the Payer's bank account (i.e. just put back in the Suspense Account).
7. If counterclaim is raised & unsuccessful, the DDIC proceeds, funds are collected on the stated date and put back into the bank's suspense account.
8. If no counterclaim is made, the DDIC proceeds, funds are collected on the stated date and put back into the bank's suspense account.

Source: I work with Direct Debits day in, day out and have seen many a spurious DDIC come through.

Hazzanet

6am wrote: »

I bought an insurance but decided to cancel it before the end of cooling off period. I notified the company. I did not cancel direct debit instructions believing that the company will not take the money. However they did. I did not make any claims during cooling off period therefore I am entitled to cancel the insurance contract without any financial repercursions. By taking the money from my account the organisation made an error. I am entitled to a full and immediate refund from my bank of the amount paid.

1. That to me appears to be a valid claim, however when cancelling, did they say that they would refund you, or did they say that they wouldn't take the first DD? My concern here is that if they have refunded you back to the bank and you have made the DD claim, you may end up with twice the money back which means that they could/should reclaim it from you.

2. I would have a chat with the company concerned and double check that they haven't already refunded you.

3. If you are paying by installments, was this a credit agreement? If so, has this been properly cancelled?

meer53

If you had cancelled your policy before the Direct Debit was claimed, you should have cancelled the direct debit at that time. The bank cannot do this for you. They have not made an error, you have.

The bank staff don't need t have any more training, they asked the correct questions. If you had cancelled the direct debit in the first place, this wouldn't have happened.

As long as you cancelled your policy within the cancellation period, you won't have a problem.

Hominu

6am wrote: »

I bought an insurance but decided to cancel it before the end of cooling off period. I notified the company.

Do you have proof that you cancelled the contract within the stated cooling off period? The bank may ask this if the company refuses the refund.

Though you should have cancelled the DD when you cancelled the contract, and sent a copy of the cancellation to the company concerned for their records.

DDs are usually setup to collect between 10 and 14 days before the collection period, so if you don't cancel it, I'd expect it to go out regardless.

6am

Hazzanet wrote: »

1. That to me appears to be a valid claim, however when cancelling, did they say that they would refund you, or did they say that they wouldn't take the first DD? My concern here is that if they have refunded you back to the bank and you have made the DD claim, you may end up with twice the money back which means that they could/should reclaim it from you.

2. I would have a chat with the company concerned and double check that they haven't already refunded you.

3. If you are paying by installments, was this a credit agreement? If so, has this been properly cancelled?

When the company took money via DD couple of weeks ago I went to the bank to cancel DD and request a refund. Today I was surprised to receive a cheque from the company (for the smaller amount then I paid). I checked my online banking and noticed that while DD was cancelled the money were not refunded. So I went to the bank and insisted they refund the money as originally instructed. Then I called the company. They confirmed that
a) I cancelled the contract during cooling off period
b) I do not owe them anything
c) They made a mistake by sending cheque with smaller amount then required
d) They are going to send me another cheque for the difference

I said I requested the money via DD guarantee and am not sure what do to with their cheques. They do not know either. I am going to wait for a month and if money are successfully refuned via DD guarantee I will destroy cheques and notify the company.