The Direct Debit Guarantee

HOW TO CLAW BACK A DIRECT DEBIT

Don't give the bank too much information!!!

Some banks will claim it is a "Contractual Dispute" and refuse to refund.

Ever been stung by a forgotten direct debit? Had an incorrect amount of money taken from you by direct debit? Or perhaps had a direct debit taken at the wrong time causing you financial hardship? I suppose like most people you think the money is gone and can’t be recovered? Perhaps you think it was years ago so nothing can be done?

WELL THEN YOU HAVE BEEN MISLED.

The reality is like most people you probably don’t know how to use the direct debit system….and the big corporations don’t want you to know, they prefer you live in ignorance and keep paying up like a good little cash cow.

SO NOW TO ARM YOURSELF WITH KNOWLEDGE, LETS BUST SOME MYTHS

Direct debits are not a one way street (e.g. money only comes out of your account). Money can travel both ways.

The money that is debited from your account does not go to the company you owe; it in fact goes to the bank…they then pay the company from a different fund. The bank is acting as a guarantor for the direct debit system.

If a direct debit is taken from you for the wrong amount, at the wrong time or a payment that you didn’t want to be taken then the bank have a contractual responsibility to refund the payment back to you. It is part of the DIRECT DEBIT GUARANTEE.

There is no real time limit to this either but the bank are required to hold the records for 6 years.

If you can prove payments beyond that, they have to refund those as well.

Go into the bank:

Call the bank or go into a branch, tell them what has been taken and when. Then say you want to make a direct debit indemnity claim (pronounced in-dem-nitty).

Don’t go into details because you don’t have to;

just tell them the amount was taken in error or at the wrong time. Sometimes the staff member won’t know what you’re talking about or try to fob you off, eventually they will seek advice from a supervisor and it will be paid….but usually they do it right then and there. If you encounter some resistance you only need to tell them that it is their responsibility under the direct debit scheme to refund you.

If you go into too much detail, the bank may take you down a civil dispute process, which is not what you want. Be clear that you require them to honour the direct debit procedures. You dispute, they refund, simple.

Here’s the story of how I found out about how to do this…in case anybody is wondering

Years ago I lived in a bit of a rough area so I sensibly took out home insurance; I paid the premiums for two years by direct debit then I was burgled while out working a night shift. I dutifully filed a claim with my insurer but they refused to pay me on a silly technicality.

At first I complained and was rebuffed, I went to the ombudsman and got fobbed off…so in my anger I decided to take revenge on the insurance company for swindling me and I resolved myself to make them pay a price for the deception. I sat down and read the small print of the direct debit agreement then lo and behold I found the clause for refunds.

I went into my bank and told them I had been paying by direct debit for two years by error and requested a refund of the entire amount. Back then the refund process wasn’t as well known as it is today so I had to keep repeating myself until the branch staff member went and double checked with the bank manager, he of course knew what I was talking about. I took back every penny I had ever paid to the insurance firm…two years worth of payments. Although it didn’t cover everything I lost in the burglary it felt good to punish the insurance company for trying to swindle me.

You can reclaim a direct debit for any reason and you don’t have to tell the bank anything more than it was either the wrong amount, taken at the wrong time or it was taken in error.

It’s childishly easy

New Indemnity Claims rules take effect 1st February 2017

What is an Indemnity Claim?

Indemnity Claims are the method by which a payer can claim their payment back under the Direct Debit Guarantee. The bank is obliged to offer an immediate refund in the event that a Direct Debit has been taken in error or without authority. This refund is then claimed back out of the bank account of the company that established the direct debit.

The Company claiming the payments can challenge or raise a counter-claim within 14 working days if they can provide evidence that the Direct Debit was legitimately taken within the framework of the BACs Guide and Rules. Up until now this has been impossible if the sign up method was paperless as the Service User would not have a signed mandate as supporting evidence.

So what’s changing?

The revised Indemnity Claim Rules allow greater scope for Companies, taking payments, to challenge or counter-claim indemnity claims.

A key addition is where the payer is disputing having given authority, previously this could only be challenged if the Service User has a signed mandate as proof of authority being given. This has now been expanded to allow a Counter Claim if there is evidence of a contract either signed by the payer, or where the payer does not dispute the existence of the contract, referring to payment by Direct Debit.

Template letter to bank in the event of a Direct Debit

being deducted on the wrong date or for the wrong amount

[Your Address ]

[Bank Address]

[Date]

Dear Sir/Madam,

Account number:

Sort Code:

Company Name: [name of organisation taking the Direct Debit]

Reference: [Insert the Direct Debit reference from your bank statement]

Amount: [Insert amount deducted]

Date: [Insert date amount debited]

The Direct Debit detailed above, has been deducted from my account *on a date other than that agreed with the organisation / *for an amount other than that agreed with the organisation.

Under the terms of the Direct Debit Guarantee, please re-credit my account accordingly and confirm in writing once you have done so.

I have copied this letter to [insert organisation name] for their information.

Yours faithfully,

[signature]

Cc [insert organisation name]

*(delete as applicable).

The Bank Refuse to refund the disputed Direct Debit

Often banks will try to claim that the issue is a "contractual dispute" and refuse to refund the direct debit. This is usually when too much detail is given to the bank. KEEP IT SIMPLE, the amounts taken are simply disputed. Refuse to go into any further details.

How to complain

• If the complaint relates to an error with the payment of your Direct Debit, begin by contacting your bank. Every bank and building society that is a member of the Direct Debit Scheme has a complaints procedure. To find out about it, ask a member of the bank’s staff or look on the bank’s website. Your bank should be able to resolve your problem however, if you are not satisfied with the way in which your complaint has been handled, you can refer to the Financial Ombudsman Service (FOS). Details of how to complain to the FOS can be found at www.financial-ombudsman.org.uk/consumer/complaints.htm.

Complaints handling procedure flowchart

Complain to Bacs for Direct Debit problems:

Email: servicedesk@bacsservices.co.uk

Phone: 0330 123 0363* - The helpline is available 9.30am to 5pm Monday to Friday except for Bank Holidays.

* Calls to this number will cost no more than calling a geographical 01 or 02 number in the UK, it is also included in BT’s calling plans (inclusive minutes) other networks may vary.

THE PROCESS

Indemnity Claims The indemnity is an essential part of the Direct Debit scheme and one of the key aspects that differentiate Direct Debits from other forms of payments. Under the Direct Debit Guarantee the Service User must agree to the indemnity process.

This Guarantee is unlimited in time and amount, so a payer can always request a full and immediate refund from their paying bank or building society if they believe that an error has been made. (Note: An indemnity claim must be raised for the full amount of the original payment, not part of the amount). The bank will be required, under the Guarantee to refund the payer. Service User Error If the error is made by the Service User, the bank will use the indemnity claim process to reclaim the refunded payment from the Service User. Indemnity claims in most cases are automatically collected after 14 working days unless challenged.

Depending on the reason for the claim the Service User may challenge the claim or counter claim afterwards. Bank Error If the error is due to the bank, the bank may raise a refund request, which the Service User can choose to settle but is under no obligation to do so.

Bank Refund Request If the error is found to have been made by the paying bank, the paying bank cannot raise an indemnity claim. If however there is cause, they may raise a Refund Request with the Service User. The payer will already have received a refund and therefore a Service User shouldn’t settle directly with them as the payer could be paid twice. The Service user can: – Refuse to settle the request – Settle part of the request (eg by deducting an admin fee) – Settle the whole amount.

Paying banks are not permitted to raise an indemnity claim if an identical Refund Request has previously been refused by the Service User. In this instance the Service User should raise the issue with their sponsor bank.

Indemnity Claims:

Process The Service User must not settle an indemnity claim by remitting directly to the payer. This is because the paying bank will settle an indemnity with the payer and the Service User will still be liable to pay the paying bank – thereby paying twice.

The payer contacts their bank and asks for a full and immediate refund The bank considers the request and if the indemnity fulfils one of the criteria for a valid claim, they will refund directly to the payer. The bank will then raise an indemnity against the Service User.

The Service User can choose to challenge the indemnity within the first 9 days or the amount will be debited after 14 working days The Service User then has a further 14 working days to raise a counter claim depending on the reason code. The paying bank will consider any counter claim and act within 90 days to settle or dismiss.

It is possible to claim your standing order payments back too!

If you establish it is a banking error, they will have to refund the Standing Order. It is possible that you telephoned the bank, after the Standing was set up, and they simply forgot or misplaced your instruction to cancel it (unfortunately banks make mistakes and often misplace instructions made over the telephone).

If you tell the bank you phoned telephone banking and asked them to cancel the standing order, which they failed to do, they will have to refund because it is a banking error.

A banking error is only way you’ll get a refund for a standing order.