How does paying off a credit union loan by DD work?

Hippodrome Song Owl

I'm trying to understand a situation for an elderly parent who is confused and concerned about a CU loan and unable to contact CU or bank for the moment. I've never had a loan so I've no idea. She's not well enough to attend in person just now and is too deaf to phone.

She has had a monthly DD of €150 from bank to pay a CU loan for the past 2 years - set up in person at the CU when arranging the loan. In addition she has €20 weekly DD from bank into CU for savings. All payments made without issue over the past few years.

According to the loan agreement, the final payment was to be in August 2022 and only around €40. The €150 DD from her bank account has continued in Sept and Oct, and presumably will in Nov too.

If the loan is paid off as per loan agreement, then is the additional money paid by DD since then going into her CU savings account? Or where is it going? And so my mother needs to contact the bank to cancel the €150 DD? She was under the impression the €150 DD would just stop once the loan was paid off in August, but clearly that's not correct?

Can anyone clarify?

If the money is now just going into her savings then it's fine for the moment and can be sorted in a few weeks hopefully. Thanks for any insights on how this works.

NewbridgeIR

Are you sure it's a direct debit not a standing order?

If direct debit - then she should cancel with her bank and notify the originator (the Credit Union). It would be unusual for the originator to keep taking direct debits if the loan was repaid.

If standing order - then she should cancel with her bank

Hippodrome Song Owl

https://www.boards.ie/discussion/comment/119837034#Comment_119837034

Thanks for your response. It is a DD according to her bank statement. She cannot go to the bank or CU for now due to illness and is too deaf to do it by phone.

Looking at the loan agreement now, it states the loan would be repaid by 21x€150 monthly payments and a final instalment of €18.61 in mid-August. In total 25x€150 DDs have been made from her bank account so far. (No money has been withdrawn from her CU since loan was arranged and she also pays €20 a week for savings by separate DD). The loan must surely be paid off now.

If the additional €580+ has simply gone into her savings account then that's OK for now until she is able to go to the CU to confirm loan is paid off and then to bank to cancel the DD.

But she is worried the extra money is just being taken from her. I want to reassure her her extra money paid out will be there for her when she's recovered.

Or is this something that needs more urgent follow up to ensure she isn't just watching €150 a month disappear into a black hole from which she will struggle to recover it?

stargazer 68

Had the same thing myself just recently. My loan repayment was being deducted from my salary. When the loan was finished it was still being deducted.

I contacted the CU and they said that I had to write to them to instruct them to stop the payment. It was being put into my savings though. Draw up a letter and get her to sign it and send it in to them, I emailed mine to them.

Hippodrome Song Owl

Thank you @stargazer 68 . Hopefully her money is just going into her savings account too. That would be fine for now. I really don't want to interfere in her finances, so if that's the case she will be able to sort it herself in person in a couple of weeks. But obviously I don't want to see her losing money. I will offer to type up a letter to the CU for her if she wants to handle it sooner.

Kalimah

It will go into savings when the loan is paid off. I finished a loan in August too and the last two DDs have been credited to savings.

NewbridgeIR

https://www.boards.ie/discussion/comment/119837191#Comment_119837191

I don't think the Credit Union are being fair with that practice. The direct debit is specifically for the loan repayment. The loan is now repaid so it should be their responsibility to cease presenting the direct debit as soon as the loan balance reaches zero. I don't think they're entitled to keep taking it - what if the customer had other plans for those funds? If this continues for a few months afterwards then the customer could find themselves running short or have other items bounced by their bank because they hadn't bargained for this.

I have never had a Credit Union loan or savings so maybe this is how they operate - but for a regular bank loan - the repayments should cease as soon as the loan is repaid. If there's a surplus after the final repayment (i.e. the loan account goes credit) then that should be lodged back to the customer's servicing account within a reasonable timeframe.