Bank Switching Service Cost Me £

michael1234

Hi

I thought I would post my recent experience from using the new "switching service" because I don't believe it is risk or hassle free.

So after about 15-20 years I switched away from Smile to First Direct. I had already read on this site and other places that these days switching bank current accounts should be painless and quick (7 days apparently) and that there was a guarantee should anything go wrong. I felt reassured and took the plunge and moved.

A few weeks afterwards I noticed an interest charge from my Post Office Mastercard. It wasn't a huge amount of money but enough to buy a few pints and it was annoying given the hassle-free/pain-free/cost-free promise. Looking into it a little more, I realised what had happened. I had previously had a direct debit setup with this credit card to pay the balance off in full. After the switch, that instruction had magically changed to paying the minimum without letting me know. That, of course, meant I was now paying about 19% interest.

Apart from changing my bank account and using the switching service, I had done nothing, asked for nothing to change but then incurred this charge.

So I rang FD and was told it was the fault of the PO Mastercard. I rang the Post Office Mastercard people and of course they pointed the finger back at FD. FD's argument was that any change to the direct debit had to come from the credit card company - they couldn't change the direct debit themselves so it was their fault for collecting the wrong amount. Meanwhile, the Post Office Mastercard were saying that the DD had been changed by FD - they said clearly it was with a new bank so was obviously a new DD.

So, with the bank switching guarantee, the direct debit guarantee, and the apparently good reputation of First Direct I am surprised I ended up wasting two hours going back and forth between the two before it got partially resolved.

In the end, to their credit, FD just took my word for it and gave me the money. It is not to their credit however, that the first person I spoke to was adamant it was the fault of the credit card company and so they wouldn't reimburse me.

But is it their fault or the fault of the Post Office? Or is it my fault for not monitoring my finances as closely as I could during this period? In the meantime I have opened a complaint against the PO CC and if it is found in my favour I plan to repay FD.

MyOnlyPost

AFAIK the direct debit is raised by the credit card company and they request the amount from your bank. I am almost certain the bank have any say in how much the DD will be for and so I think this will be 100% the fault of the credit card company

Second_Account

Yes it is 100% the fault of the Credit Card company. First Direct wouldn't know the minimum payment amount on your card so wouldn't be able to choose to change the DD to that even if they wanted to!. First Direct just paid you back the money out of goodwill!.

Shakin_Steve

I agree with both of the above. The PO requests the amount from the bank each month, and, with your permission (theDD) the bank pays it. This should be obvious as, if you pay in full, a different amount will be requested each month.

Anthorn

It points to a lack of information and/or understanding of the way in which the Switch Service works and the guarantee is useless. I complained about the loss of £10 and no-one wants to know. It's not really worth it to push for just £10

My problem is almost a carbon copy of the experience of the OP. I switched from TSB to Lloyds Bank using the 7 day switch service. My income was transferred and all 23 direct debits went through without problems except for one, TalkTalk: Although their direct debit was transferred to Lloyds in time they did not debit my account and did not tell me about it. The first I heard was that the monthly payment had not been received. I immediately paid it with my debit card and that went through the next day. But TalkTalk charged me £10 administration charge due to a late payment. I then found that TalkTalk had put a new Direct Debit on my bank account which meant there were two direct debits for TalkTalk.

Now 5 months later I am still arguing with TalkTalk about it and I still haven't received the £10 back. According to TalkTalk I changed my bank account which meant a new direct debit and I should have paid by other means until that direct debit was available to them and they quoted 5 days.

My problem had two effects: When TalkTalk increased the price of my package with them as they changed to the new guaranteed charge I moved to plusnet. Secondly I didn't use the Switch Service when I switched from Lloyds to Yorkshire Bank B.

The moral is when switching keep an eye on direct debit payments. But with some direct debits being raised on the day the payment is due going into arrears is hard to avoid.

mt99

Interesting thread. For some reason, I always assumed that when you switched the direct debits were just 'transferred', so there should be no changes and therefore no problems. However, it seems that what actually happens is that the DD at the old bank is cancelled and a brand new DD set up at the new bank. This shouldn't matter but obviously mistakes can happen in this scenario eg the credit card set up the new DD with 'minimum payment' not 'full amount'. You learn something every day.

mt99

Oh and I agree with the above posts - you instructed the CC to take the full balance and that is what they should have done. FD are completely in the right in that they only pay out what the CC asked for. The CC are completely at fault.

xylophone

Have you considered a complaint in writing to the CC company?

Shakin_Steve

Hmmm......I have 24 DD's set up with Barclays. If I decided to switch, it's bound to happen on a day when one of them is due.
A bit of forward planning would sort it, though.

johnac

mt99 wrote: »

Interesting thread. For some reason, I always assumed that when you switched the direct debits were just 'transferred', so there should be no changes and therefore no problems. However, it seems that what actually happens is that the DD at the old bank is cancelled and a brand new DD set up at the new bank. This shouldn't matter but obviously mistakes can happen in this scenario eg the credit card set up the new DD with 'minimum payment' not 'full amount'. You learn something every day.

The way that a direct debit is handled is dependant on the billing system of the organisation you're paying, the banks inform the businesses of the change in the same way (ADDACS) how the business then deals with it will depend on the business and naturally some are better than others.

michael1234

Thanks to all replies - very interesting.

It doesn't feel clear cut to me that the fault lies with the CC company for two reasons:
1/ From their point of view, I cancelled the DD and started a new one and I hadn't explicitly informed them that I wanted this new DD to continue with a full balance monthly payment. They claim that their policy is to start all new DD with minimum-balance only unless explicitly informed by the customer.
2/ The bank switching service/guarantee in a nutshell leads the customer into believing that they can't lose money as a result of the switch. I think that might be why FD honoured the payment.

All told I think the financial services people (whoever they are) need to improve this switching service and the likes of MSE/Which?/MoneySectionsInNewspapers/etc and others who frequently suggest people should switch their bank accounts should stop doing so until this issue is resolved.

Note I have lodged a formal complain to the CC company and will take it at least to the Ombudsman if necessary. If I win, I will refund FD. I'll also update this thread.