New Direct Debit Guarantee Loophole Exploit. by Shell Energy

rjesson

A short time ago I moved to Shell Energy and have noticed a difference in their Direct Debit Guarantee. The standard direct debit guarantee that is used by most companies requires them to give the customer 10 working days notice of any change in amount or date of any debit. Apparently Shell have approached their sponsoring bank (Barclays) and asked the 10 working day period to be slashed to 3 working days. I have asked my bank and was told that I need to give 4 days to cancel a direct debit and be sure that any pending payment would not go through.  So this move by Shell effectively gives them the ability to remove as much as they want, whenever they want, from my bank account and also removes my ability to stop them if I disagree with the amount.  It feels the same as if I had given them my on-line banking passwords and invited them to just log in and take what they want.

Neil_Jones

rjesson said:

A short time ago I moved to Shell Energy and have noticed a difference in their Direct Debit Guarantee. The standard direct debit guarantee that is used by most companies requires them to give the customer 10 working days notice of any change in amount or date of any debit. Apparently Shell have approached their sponsoring bank (Barclays) and asked the 10 working day period to be slashed to 3 working days. I have asked my bank and was told that I need to give 4 days to cancel a direct debit and be sure that any pending payment would not go through.  So this move by Shell effectively gives them the ability to remove as much as they want, whenever they want, from my bank account and also removes my ability to stop them if I disagree with the amount.  It feels the same as if I had given them my on-line banking passwords and invited them to just log in and take what they want.

This happens with a lot of other providers, not just Shell.

And it can be varied:

https://cleardirectdebit.co.uk/direct-debit-advance-notice/

Typically, the default period (the time allowed for receipt of the advance notice by the payer) is a minimum of 10 working days plus postal time. If your organisation has not requested anything different to this you will typically be required to give 10 days. It is possible however to request a shorter time period from the bank – for example 3 working days. If this is agreed your Direct Debit Guarantee should reflect this and you would be required to provide 3 working days

Petriix

It's (at least ostensibly) so that they can offer a variable direct debit where they charge you for the energy you use each month rather than guessing how much you'll use in a year and dividing that by 12 (like most companies do).

In any case when you switch providers you will have several weeks to cancel your direct debit. With Shell, unless there's been a billing error, you shouldn't have built up any credit or debit.

rjesson

Petriix said:

It's (at least ostensibly) so that they can offer a variable direct debit where they charge you for the energy you use each month rather than guessing how much you'll use in a year and dividing that by 12 (like most companies do).

In any case when you switch providers you will have several weeks to cancel your direct debit. With Shell, unless there's been a billing error, you shouldn't have built up any credit or debit.

Certainly in this case they intend to just divide by 12 and bill, because they have told me that they they will only review the DD amount once every three to six months and I have 1st generation smart meters and they can't read them remotely. So they can't use that excuse and in any case with the standard 10 days notice they can still vary it every month if they wanted to. I must admit it is clever they have found a way of getting around the usual direct debit guarantee notification period because 3 days means it can't be canceled in time and the guarantee is not with the paper it is written on.
Unfortunately my 14 day cooling off period had expired before I noticed this, otherwise I would not have signed up with them. I will be more careful next time.

rjesson

Neil_Jones said:
This happens with a lot of other providers, not just Shell.

This does not seem to happen a lot!  
I guess some other companies have also learnt about this loophole and are happy to exploit it, I will now never switch to a company that is so underhanded, but I have checked a lot of the other energy companies, the results are below:
SSE -10 days
British Gas -10 days
EDF -10 days
EON -10 days
Scottish Power -10 days
NPower -10 days
Bulb Energy -10 days
Bristol Energy -10 days
Ebico / Robinhood -10 days
Octopus Energy -5 days
Shell Energy -3 days
OVO Energy -3 days

So it is only Shell and OVO that show very badly in this list. None of the big six find it necessary to be this underhanded (not that this is the only criteria for choosing who to go with)

Talldave

Why is it a loophole? Why is it underhanded? 

rjesson

Talldave said:

Why is it a loophole? Why is it underhanded? 

Because The direct Debit Guarantee normally would give enough time for you to stop an erroneous payment, by reducing it to 3 days you can not! It is a loophole because it is allowed under the rules and allows the company to deprive you of this option. But most people would feel that it constitutes an unfair contract and most companies don't feel the need to do this. They are also well aware that most people don't re-read the direct debit guarantee each time.
Many consumer advice websites seem to be unaware this can happen and they are telling people that all companies need to give 10 working days notice.
I feel it is worth shining a light on this issue.

Talldave

Banks should only need a day's notice to cancel - so says directdebit.co.uk - so your bank isn't playing by the rules.

inspectorperez

rjesson said:

Talldave said:

Why is it a loophole? Why is it underhanded? 

Because The direct Debit Guarantee normally would give enough time for you to stop an erroneous payment, by reducing it to 3 days you can not! It is a loophole because it is allowed under the rules and allows the company to deprive you of this option. But most people would feel that it constitutes an unfair contract and most companies don't feel the need to do this. They are also well aware that most people don't re-read the direct debit guarantee each time.
Many consumer advice websites seem to be unaware this can happen and they are telling people that all companies need to give 10 working days notice.
I feel it is worth shining a light on this issue.

Definitely a good spot and thanks for flagging this up.

It's certainly one to watch for when signing up to direct debit guarantees as there without doubt some unscrupulous companies out there who will take advantage!

brewerdave

Talldave said:

Banks should only need a day's notice to cancel - so says directdebit.co.uk - so your bank isn't playing by the rules.

I've cancelled a DD online with Santander the day before it was due, and it stopped the payment.

rjesson

Talldave said:

Banks should only need a day's notice to cancel - so says directdebit.co.uk - so your bank isn't playing by the rules.

Quote directly from direct debit.co.uk:
"Your bank or building society will generally require at LEAST a day's notice before the Direct Debit is due to be paid. Try not to leave it until the last minute or you run the risk of a payment being made, so it is best to check how long your bank or building society needs to do this." If you just cancel on line, any pending payment will still go through.
They also say it is "NORMAL" for a company to give you 10 working days notice. That begs the question "why do some companies feel the need to have an "abnormal" notice period?