Mortgage Direct Debit Problem

davidlizard

Our fixed rate mortgage ended last month, and we were put onto the standard variable rate. However, as we could now make unlimited overpayments, we paid off all but £25 immediately. I plan to knock the mortgage on the head - pay of this £25 and any redemption fees (£50ish) when I am next in town. This approach was discussed with their mortgage adviser in June, who said this would be fine.

The problem is that our mortgage company plan (from looking at our online account) to take £950 from our account next month despite us only owing them £25 (as shown online - the cheque cleared 3 weeks ago BTW). £950 would have been our monthly repayment if we had not made the overpayment. I have contacted them four times (twice on the phone, twice by email), and have been told they will look into it and get back to me with a revised repayment schedule. To date, I have received nothing.

If they take £950 from my account next week, I will go overdrawn, other direct debits may then not get paid, which will cause all sorts of hassle, unless I sort something out. I will therefore have to make provisions to make sure this does not happen (probably move money over from a savings account at the expense of 1 months interest loss).

I have told the mortgage company I will cancel the direct debit to prevent them taking this money, but they have stated that if I do, I will be hit with a penalty charge.

My questions I think I want to ask are:

1. Can they legitimately take £950 when I only owe £25 (and certainly no more than £100 with redemption fees)
2. If a direct debit is incorrectly taken, how long will it take for the money to be refunded (I vaguely recall there being a direct debit guarantee) ?
3. Can I realistically expect to be reimbursed for any losses incurred (e.g. loss of interest on my savings moved to cover this eventuality).
4. Would I be best off canceling the direct debit and arguing the toss with them later?

All advice gratefully received.

dunstonh

1. Can they legitimately take £950 when I only owe £25 (and certainly no more than £100 with redemption fees)

Yes.

2. If a direct debit is incorrectly taken, how long will it take for the money to be refunded (I vaguely recall there being a direct debit guarantee) ?

It hasnt been incorrectly taken though. Did you receive notification of a change in amount? No.

3. Can I realistically expect to be reimbursed for any losses incurred (e.g. loss of interest on my savings moved to cover this eventuality).

No. Normal monthly payment was collected as per usual.

4. Would I be best off canceling the direct debit and arguing the toss with them later?

Probably.

You need to be aware that the overpayment facility does not alter the monthly payments on the mortgage unless you instruct them to.

davidlizard

Many thanks - they used to write to me each month when I make an overpayment telling me how much my revised monthly payment will be - which is why I got concerned that I was not written to when I made the large overpayment. Each time I overpay, they have written acknowledging my overpayment, they usually inform me the DD has gone down by about £10 a month (the term stays the same).

I have phoned them again today, been passed around and have been given two figures (after hearing typing on a keyboard!) for the DD - one of c£600 and one of c£1900. They admit neither are right but do not know why, so I have been told to cancel the direct debit.

I find it amazing that one can pay off all but a few pounds of ones mortgage, yet still be expected to pay the full monthly direct debit until they get round to writing, even if the monthly direct debit is 30 times larger that the outstanding balance!

dunstonh

Many thanks - they used to write to me each month when I make an overpayment telling me how much my revised monthly payment will be - which is why I got concerned that I was not written to when I made the large overpayment. Each time I overpay, they have written acknowledging my overpayment, they usually inform me the DD has gone down by about £10 a month (the term stays the same).

That's interesting as you often get the choice. Any change of direct debit amount has to be notified in writing.

If the amount is signficantly bigger than a typical repayment, then its probable that it has handled by a different department. It may have been the redemptions team for the lender who wouldnt make any changes to the direct debit as they could see your payment as a closing one. Although you would expect them to act a little quicker.

I find it amazing that one can pay off all but a few pounds of ones mortgage, yet still be expected to pay the full monthly direct debit until they get round to writing, even if the monthly direct debit is 30 times larger that the outstanding balance!

If they believe you are paying the mortgage off, they wouldnt alter the direct debit as they would expect that to cease. One of the warnings advisers give when involved in redemptions is that you shouldnt cancel the direct debit until loan is closed and do expect to make a payment which may be over the amount required and you will get back the difference.

I think the fact the amount was so close to zero but not quite, has been the cause of the problem but their systems havent been able to pick up that fact and get someone to deal with it.