Reinstating direct debits - what law does this break?

dub45

In spite of the so called direct debit guarantee it is possible for a Company to reinstate a direct debit - and I have been told recently that this is on the increase. Apparently it is due to a flaw in the banks system and a simple change in a number allows the dd to get through.

I would assume that this activity is in contravention of some law? And I was wondering if any legal experts could tell me which law?

The customer has explicitly withdrawn authority through the cancellation of the direct debit and the Company is wilfully ignoring this and misusing information it has on hand to access a bank account.

If this act is illegal then I presume there is a legal obligation on the bank branch of the customer concerned to report this activity to the Gardai?

I would also assume that when IPSO become aware of such activity that there would also be a legal obligation on them to report the matter.

IPSO (www.ipso.ie) have acknowledged to me that they are aware of such cases and have dealt with them under their own rules.

I have no doubt given a previous finding in relation to the misuse of credit card information that this activity breaches the data protection regulations.

dudara

Best suited to Banking & Insurance & Pensions

There is also the question if the customer has correctly cancelled their contract/obligation with the provider. A lot of people cancel direct debits, believing this cancels their contract, when in reality that needs to be cancelled separately.

This is a good discussion topic.

dudara

dub45

In asking the question I am assuming that everything has been done properly. The dd is only a way of paying a bill nothing else. So lets assume everything else is in order:)

stepbar

The contract for a D/D remains between you and the service provider. The fact you've cancelled a D/D through the bank, without reference to the service provider it not a matter for the bank. The contract still remains between you and the service provider. They reserve the right to reinstate the D/D without reference to you unless you contact them and agree cancellation with them (they must be agreeable in all cases).

dub45

stepbar wrote: »

The contract for a D/D remains between you and the service provider. The fact you've cancelled a D/D through the bank, without reference to the service provider it not a matter for the bank. The contract still remains between you and the service provider. They reserve the right to reinstate the D/D without reference to you unless you contact them and agree cancellation with them (they must be agreeable in all cases).

That is not the case. There is no contract as such in relation to a direct debit. You agree to pay that way that's all.

The correct way to cancel a direct debit is by informing your bank. They in turn inform the company concerned.

There is no question of a company 'reserving the right' as you state I don't know where you got this information?

There are obviously legal ways for a company to pursue someone who they consider owes them money or has broken a contract even IPSO would acknowledge that reinstating a direct debit is not one of those ways.

The following is from the IPSO guide to the direct debit system:

The payer can cancel or amend the Direct Debit instruction at any time by informing their Bank in writing. They should also inform the Originator. All correspondence should be retained.
o The payer’s Bank will then inform the Originator of the cancellation or amendment.
o If the instruction is cancelled no further collections are permitted.

foggy_lad

even if the customer owes money to the company it does not give the company any entitlement to reinstate any direct debit as there are alternative methods of recovering what they might perceive to be bad debts.

tenchi-fan

The best way to cancel your DD is to phone the company and tell them to suspend the DD on their system. Depending on the company, chances are you will probably owe them money even after cancelling a DD. Phone companies and subscription channels usually have a 30day notice period you must give them before cancelling your contract - even when you are outside their 12/18 month contract so they will usually want to collect this by DD.

After you have told the company not to collect any more DDs, simply go online and cancel the DD mandate with your bank.

If a new DD comes from your bank account under a different reference number you can phone the bank up and tell them to reverse it because they do not have a mandate for it.

jor el

I think it all depends on the bank, and possibly the staff in the branch, as to what happens when you cancel a direct debit. I've canceled quite a few DDs with my bank (BOI) and always inform the originator too. Twice, the originators have tried to continue collecting on the DD, but were refused by the bank. The bank has never reinstated a canceled DD on me.

This is the way it should be in all cases. A direct debit should never be reinstated without the account holder's permission.

stepbar

Eh, did you inform the service provider? I take you didn't and in any event they reserve the right to say no. So what i've said is correct.

tenchi-fan

stepbar wrote: »

Eh, did you inform the service provider? I take you didn't and in any event they reserve the right to say no. So what i've said is correct.

Sorry but this is completely wrong.

OP have a look at this:
http://www.ipso.ie/index.php?Itemid=172&id=35&option=com_content&task=view

dub45

stepbar wrote: »

Eh, did you inform the service provider? I take you didn't and in any event they reserve the right to say no. So what i've said is correct.

What you have said is nonsense. A service provide has got nothing to do with your ability to cancel a direct debit.

A direct debit allows the business to access your account only for as long as you leave the direct debit in place - nothing more. How can any business access an account legally without the owners permission?

Direct Debit (DD) A service for the debiting of an account held by a Payer with a Paying
Bank, where the debiting of such account is initiated by the Originator on
the basis of the Payer’s consent given to the Originator

That is the definition of a direct debit from the rules of the direct debit scheme.

Other items of interest from the rules.

The Direct Debit is a means of payment, and has no direct bearing on the underlying contract
between the Payer and the Originator.

· You can cancel the Direct Debit Instruction by writing in good time to your Bank.

dub45

tenchifan wrote: »

The best way to cancel your DD is to phone the company and tell them to suspend the DD on their system.

Again with all due respects this is nonsense. Firstly there is a definitive way to cancel your dd and that is by informing your bank. There simply is no other 'best' or even 'correct way'.

Phoning the company apart from being incorrect procedurally leaves no record of your request and to use the word 'suspend' is asking for trouble seeing as how many companies apparently dont understand the word 'cancel'.

Depending on the company, chances are you will probably owe them money even after cancelling a DD. Phone companies and subscription channels usually have a 30day notice period you must give them before cancelling your contract - even when you are outside their 12/18 month contract so they will usually want to collect this by DD.

What a company wants is irrelevant. Companies 'want' to do loads of things that doesnt mean they can! The company may legitimately want any outstanding moneys and the customer of course remains liable for that.

After you have told the company not to collect any more DDs, simply go online and cancel the DD mandate with your bank.

If a new DD comes from your bank account under a different reference number you can phone the bank up and tell them to reverse it because they do not have a mandate for it.

If a new DD comes in from a company under a different reference number then they are wilfully trying to access a person's bank account without permission. Which in my view is a breach of the law and nicely brings me back to the point of the thread (which is not about the procedure for cancelling direct debits) it is about hopefully finding out from some person with legal knowledge what law(s) such an attempt would be in breach of?

Toots

The correct way to cancel a DD is to inform both the bank and the service provider, in writing. Keep copies of both letters, and ask for written confirmation on both. This way the service provider will not present for the DD and have it returned 'mandate cancelled', and also it means that it will be cancelled on the bank's systems in case the originator does not cancel it in time. Depending on the company and their systems, some originators DD presentation process can start up to 5 days before the DD is due out of the account, so they may not be able to cancel it on their end in time.

I don't know what laws this would be in breach of. I couldn't speculate either without knowing the ins and outs of the case. Assuming the customer is not under any contractual obligation to continue paying this company money, that the originator is no longer providing a service to them (and that they have cancelled the DD in the manner I suggested above), and the company continues to debit it from their account my advice would be as follows:

• Contact your bank and ask them to retrieve your money from the company through the 'Direct Debit Indemnity Scheme'.
• Send a letter to the company stating that if they continue to debit money from the account, you will be forced to take legal action (what that may be I don't know, but the threat may be enough to scare them off). Also advise them that you will be reporting them to IPSO.
• Report them to IPSO and see what advice they give.
• If they keep debiting money from you, seek legal advice, a solicitors letter might put a stop to it.

I have seen lots of customers have problems with DDs being put through on their accounts however not to the extent you describe. I very much doubt the bank would be under any obligation to contact the Gardai, although the customer could go to their local station and see what they say. I'd imagine they'd advise them to contact a solicitor though.

tenchi-fan

dub45 wrote: »

Again with all due respects this is nonsense. Firstly there is a definitive way to cancel your dd and that is by informing your bank. There simply is no other 'best' or even 'correct way'.

Phoning the company apart from being incorrect procedurally leaves no record of your request and to use the word 'suspend' is asking for trouble seeing as how many companies apparently dont understand the word 'cancel'.



What a company wants is irrelevant. Companies 'want' to do loads of things that doesnt mean they can! The company may legitimately want any outstanding moneys and the customer of course remains liable for that.



If a new DD comes in from a company under a different reference number then they are wilfully trying to access a person's bank account without permission. Which in my view is a breach of the law and nicely brings me back to the point of the thread (which is not about the procedure for cancelling direct debits) it is about hopefully finding out from some person with legal knowledge what law(s) such an attempt would be in breach of?

Hi Dub.

"with all due respects this is nonsense" ... that doesn't sound very respectful.

I posted this useful link earlier in the thread :
http://www.ipso.ie/index.php?Itemid=172&id=35&option=com_content&task=view

So I guess you could call me a person with legal knowledge of the law.

This link also states: "The payer can cancel or amend the Direct Debit instruction at any time by informing their Bank in writing. <B>They can also inform the Originator</b>. All correspondence should be retained."

In fact because the originator sends the instruction to the bank it makes most sense to contact the supplier first. I work for a company that collects DDs. If the customer calls us to stop the DD, we simply stop sending the instruction to the bank. It stops us from attempting to collect a payment, then writing to the client to let them know their DD was returned and to complete a new mandate (that could be pretty confusing for the client)
Edit: obviously a letter is better, but what if the DD is meant to go the following day, while a letter may take up to a week to be received and actioned. I just meant a bit of communication with the originator is a good idea.

dub45

tenchifan wrote: »

Hi Dub.

"with all due respects this is nonsense" ... that doesn't sound very respectful.

I posted this useful link earlier in the thread :
http://www.ipso.ie/index.php?Itemid=172&id=35&option=com_content&task=view

So I guess you could call me a person with legal knowledge of the law.

This link also states: "The payer can cancel or amend the Direct Debit instruction at any time by informing their Bank in writing. <B>They can also inform the Originator</b>. All correspondence should be retained."

In fact because the originator sends the instruction to the bank it makes most sense to contact the supplier first. I work for a company that collects DDs. If the customer calls us to stop the DD, we simply stop sending the instruction to the bank. It stops us from attempting to collect a payment, then writing to the client to let them know their DD was returned and to complete a new mandate (that could be pretty confusing for the client)
Edit: obviously a letter is better, but what if the DD is meant to go the following day, while a letter may take up to a week to be received and actioned. I just meant a bit of communication with the originator is a good idea.

The link you posted has nothing got to do with the law. The rules of the direct debit system are not enshrined in law. What you suggested is not good practise and it is not the correct way to cancel a direct debit - anyone dealing with any company knows how easy it is for them to claim they never got a phone call and 'suspend' is not a word to be found anywhere in the scheme in relation to a direct debit. A bit of communication with the originator is of course a good idea but it has got absolutely nothing to do with cancelling a direct debit properly.

I think most people would accept that reasonable period of notice is practical.

dub45

Toots* wrote: »

....................................
I don't know what laws this would be in breach of. I couldn't speculate either without knowing the ins and outs of the case. Assuming the customer is not under any contractual obligation to continue paying this company money, that the originator is no longer providing a service to them

How often does it have to be said?? the liability of a customer to pay a company money has got nothing at all to do with the cancellation of a direct debit. A direct debit is simply a way of paying a bill.

Toots* wrote: »

follows:

• Contact your bank and ask them to retrieve your money from the company through the 'Direct Debit Indemnity Scheme'.
• Send a letter to the company stating that if they continue to debit money from the account, you will be forced to take legal action (what that may be I don't know, but the threat may be enough to scare them off). Also advise them that you will be reporting them to IPSO.
• Report them to IPSO and see what advice they give.
• If they keep debiting money from you, seek legal advice, a solicitors letter might put a stop to it.

IPSO are useless beyond words.

The direct debit system purpotedly allows a payer to cancel a direct debit at any time. This means that a bill payer explicitly withdraws permission from a company to access his account. End of story - the 'commercial' relationship is not affected by this.

I think that virtually everybody would consider that they could then take it for granted that their account would not be accessed again by that company in respect of that direct debit.

This is not the case and IPSO have acknowledged that there is a flaw in the system which allows a company to deliberate reinstate a direct debit and attempt to access a persons account and withdraw money from it without their permission. Apparently they and the banks are incapable or unwiling to put a system in place to stop this.

Now if accessing a persons account and removing money from it without that persons permission is not against the law then what is?

I can assure you that if I hacked into to IPSO's bank account and removed even say a fiver I dont think I would be getting a nice call from them saying please can we have our fiver back. And I am sure IPSO would be very sure that what I had done wasnt legal at all!

Toots

dub45 wrote: »

How often does it have to be said?? the liability of a customer to pay a company money has got nothing at all to do with the cancellation of a direct debit. A direct debit is simply a way of paying a bill.

It depends on who the originator is and what sort of contract you have signed. If you sign a contract saying 'I agree to pay ACME €500 per month by direct debit' and you then cancel the DD, I would say that you are breaching the agreement that you have with the company.

Also, a lot of car finance agreements are repaid by direct debit, which would also involve contracts. Many will only accept DD as a manner of payment. It's not as black and white as 'it's simply a method of payment'. If the customer owes the company money, cancels their DD and refuses to pay by other means, it puts a different slant on it.

dub45

Toots* wrote: »

It depends on who the originator is and what sort of contract you have signed. If you sign a contract saying 'I agree to pay ACME €500 per month by direct debit' and you then cancel the DD, I would say that you are breaching the agreement that you have with the company.

Also, a lot of car finance agreements are repaid by direct debit, which would also involve contracts. Many will only accept DD as a manner of payment. It's not as black and white as 'it's simply a method of payment'. If the customer owes the company money, cancels their DD and refuses to pay by other means, it puts a different slant on it.

No it doesnt. There are plenty of legal means open to companies to pursue someone who owes them money. And even IPSO accepts that under the direct debit scheme it is wrong for a company to reinstate a direct debit which has been cancelled. They just wont accept that it is against the law and once again can I point out that is what I started the thread to find out.

Toots

I'll move this to the Legal Discussion Forum, I reckon your question might be better answered there.

stepbar

I guess i'm right.

Our man in Havana

If you tell your bank to cancel a DD to ABC Limited and ABC then present the DD it will be returned upaid. End of story.

stepbar

Bond-007 wrote: »

If you tell your bank to cancel a DD to ABC Limited and ABC then present the DD it will be returned upaid. End of story.

Yep, but ABC can present the d/d again.

Our man in Havana

Not without permission of the account holder.

stepbar

Eh, if you give permission to a service provider holder to debit your account then they have the right to debit your account until such point that they agree mutually not to do same. Its as simple as that.

Kristopherus

Dub45, Are you forgetting that when you agree to pay by dd you are entering a contract to pay by that method. Therefore you have no right to approach the bank to stop the dd. They are within their rights to tell you to cancel via the provider. That was always recognised as the big drawback with dd's. However if you agree to pay by Standing Order, you hold all the cards because you will have instructed the bank & can withdraw at any time. Those were the rules when dd's became popular & I don't think they have changed.Stepbar has got it right.

Our man in Havana

Nope. Sorry we will have to agree to disagree on that one.

You tell your bank to not pay them, bank stops the payment. That is the end of that DD instruction.
The problems exist because a bank will accept a paperless instruction form a merchant. Many merchants use paperless DDs like ESB, Eircom, Bord Gais etc. What can happen is where a DD is cancelled, the originator can resubmit it with a different reference number and it will get paid as the reference number differs from the original instruction. I had this problem with BT where they tried it on. I wrote to the bank and told them not to pay them ever again unless they could produce a signed consent. That put an end to the problem.

Where a company relies on a paper DD instruction, cancelling it in the bank will stop them dead as they will need a new paper instruction to debit again.

This topic is going around in circles.

dub45

Kristopherus wrote: »

Dub45, Are you forgetting that when you agree to pay by dd you are entering a contract to pay by that method. Therefore you have no right to approach the bank to stop the dd. They are within their rights to tell you to cancel via the provider. That was always recognised as the big drawback with dd's. However if you agree to pay by Standing Order, you hold all the cards because you will have instructed the bank & can withdraw at any time. Those were the rules when dd's became popular & I don't think they have changed.Stepbar has got it right.

That is simply incorrect. There is no contract involved whatsoever in setting up a direct debit. The bank cannot tell you to cancel by contacting the company involved. they may do so (the ignorance of bank staff in relation to the direct debit system is frightening) but they would be wrong if they did.

Stepbar and your good self are wrong thankfully. God knows that the dd system has enough weaknesses as it is without those encumbrances.

Nermal

From a systems POV, we pass two pieces of info to the bank when we direct debit - our originator ID (one per company, never changes) and a BACS reference (we can vary this at will).

If a bank blocks a particular BACS reference, but we then try a direct debit with a different one, it will be honoured.

If a bank blocked an originator ID, it would not.

Perhaps a bank systems chap would tell us - if a customer asks to cancel a direct debit, what do you actually do?

Our man in Havana

They are supposed to block the originator ID. Depending on the bank official they may do one or the other or both.

dub45

Bond-007 wrote: »

Nope. Sorry we will have to agree to disagree on that one.

You tell your bank to not pay them, bank stops the payment. That is the end of that DD instruction.
The problems exist because a bank will accept a paperless instruction form a merchant. Many merchants use paperless DDs like ESB, Eircom, Bord Gais etc. What can happen is where a DD is cancelled, the originator can resubmit it with a different reference number and it will get paid as the reference number differs from the original instruction. I had this problem with BT where they tried it on. I wrote to the bank and told them not to pay them ever again unless they could produce a signed consent. That put an end to the problem.

Where a company relies on a paper DD instruction, cancelling it in the bank will stop them dead as they will need a new paper instruction to debit again.

This topic is going around in circles.

You are correct. A company can change a number associated with the cancelled dd and lo and behold the dd can be submitted and the banks' systems cannot detect it. IPSO who are most reluctant to entertain any criticism of the dd system admit to this 'flaw'

So remember a bank customer has explicitly withdrawn consent from a business to access his account which he or she is perfectly entitled to do.

And one more time from the guide to the direct debit system as available from the IPSO web site:

Cancelling and amending a direct debit instruction.
o The payer can cancel or amend the Direct Debit instruction at any time by informing their Bank in writing. They should also inform the Originator. All correspondence should be retained.

You can cancel the Direct Debit Instruction by writing in good time to your Bank.
...............................

Paying Banks Must:
o Only pay Direct Debits in accordance with its customer’s instruction.
o Ensure that unauthorised and/or cancelled Direct Debits are intercepted and returned immediately on presentation

The definition of a direct debit from the dd scheme rules

Direct Debit (DD) A service for the debiting of an account held by a Payer with a Paying
Bank, where the debiting of such account is initiated by the Originator on
the basis of the Payer’s consent given to the Originator.

Again from the dd scheme rules:

The Direct Debit is a means of payment, and has no direct bearing on the underlying contract
between the Payer and the Originator. The Members of the Direct Debit Scheme therefore have no
involvement in, or responsibility in relation to, the underlying commercial contract.

And from page 22 of the rules:

An Originator must not present a Direct Debit on a DDI that has been
cancelled.

You cannot get clearer than that - any companies do present them again with the number deliberately changed.

The basic point is that a payer should be able to cancel a direct debit without having to worry that it may deliberately be presented again.

'Integrity' is supposed to be a key word in the operation of the dd system according to IPSO!