Rules of direct debits


#1

Is there someone who knows how direct debits work
If I sign a Direct Debit authority for a creditor to take money from my bank each month.
Who can cancel that authority?

I had a situation whereby I signed such authority and the bank (not BNZ) opened the direct debit but it was closed the next day.
I never knew it was closed but the company claimed they had tried to take money from my bank but it was declined due to insufficent funds.
Because there was no actual authority in place because the DD was already closed there was no evidence of the company trying to take the money on my bank statements.
Because I hadn’t heard from the company I rang them and found out that the one purchase I had made of $50.00 had turned into $400.00 in four months!
Now the company is saying that only the account holder (me) has the authority to cancel a direct debit. Not the company that set it up.


#2

Ford, I can only answer on how I am interpreting what you have advised. If an authority was closed then the dishonour reason code would not be insufficient funds but should have been authority stopped, so without seeing the actual dishonour I would be saying if it was 03 Insuffecient Funds then wrong dishonour reason code being used. With regards to the closing of the DD, you should request from the bank who closed the DD and they should be able to furnish yourself with the answer. Then in relation to who can close the DD, The Initiator can cancel the DD based on your relationship between them and yourself but there should be a communication. You yourself can cancel the DD and also the Bank can terminate the DD and should advise yourself. If there is no authority in place then the DD will never hit your account to be dishonoured, only insufficient funds dishonours will be an in and out of your account. Lastly you do have an onus to be checking your account and noticing that a certain payment is not coming out. I hope this helps.


#3

Hi, Thanks.
There was one transaction in December by Cardlink for the monthly account fee of $2.00 then no more after that.
I used the card a couple of months later and it accepted. But again nothing out of my bank.
When I rung Cardlink up to ask why haven’t I received any statements I was told that $400.00 was owing and that its been referred to the debt collector. I contacted the debt collector who confirmed that there had been no referral. I then contacted the company again and the lady asked for a settlement of half the amount. $200.00
I rung my bank who confirmed that there was no authority in place, but yet the company sent me only one email they had sent to my email address that showed the direct debt being declined due to insufficient funds. Other than that until I called them, I’ve not had any contact from them, no other emails, letters or phone calls.
I see you mention that the onus is on me to check payments. But Once the one and only payment came out I assumed that there was nothing to pay because I never made any purchases until February.
The company claimed to have investigated but they made no mention of the direct debit or given an explanation as to why they haven’t contacted me, Only to say I agreed to their terms and conditions. I think I must have called them out on it because they haven’t responded further.
I will contact my bank to find out who closed the direct debit.
I offered them full payment of the statement at the end of the month for the purchase which included unpaid card fees with a balance of $59.00 but they refused. All the rest is penalties and interest.

Apparently I’m liable because I signed the terms and conditions. So if someone else made the error then its my fault?


#4

Ford, based on what you are saying, I would definitely be asking the bank who closed the Direct Debit.

Also I am not entirely sure how the Cardlink piece works, as I thought Cardlink was only a card management provider not a transactional provider (fees only for card management). So not sure why a $2 fee end up being $400, even money lenders are not that extortionate.

The piece that is key here is the original $2 fee and that was Direct Debited from your account? Maybe not the transaction cost and then you used the card again but no transactions debited, so was cardlink responsible for both debiting the fee and the transaction?

Trying to help you here with what I can understand of the transactional flow.


#5

Hi,
The monthly card fee is $2.59 Inc GST
that was the only amount that was taken from my bank in December the same day the DD was opened
The DD was cancelled the day after.There were no other transactions made until February when I made the only purchase for $52.19 inc GST. The card total was then $59.06 which was never debited. The card was still active. From February until now with compounding interest and penalties it become $406.00. The statement after the February one had incurred $150.00 in dishonour and overdue fees. Even though the previous balance was only $59.06. The company has a fixed dollar late fee regardless of the balance.

That’s what I’m trying to find out. Who is liable when the DD was already cancelled and paid in full. The card was not cancelled until some months later and continued to incur fees. The Terms and conditions are for one year. It was me who called the company I just lucky I didn’t wait a whole year. I did offer the company the amount of the invoice as it was at the end of February which included the purchase I made. I offered in full and final settlement, which they refused. Their staff member had offered $200.00 which I had to accept in 5 days with fee reversal only after I paid. But they revoked that and then said $334 would settle it.

They had applied dishonour fees and accused me of having insufficient funds but because the DD was no longer in place nothing was actually dishonoured. And there was enough money to cover each months transactions had it still been in place.

Cardlink are a company that do Fuel cards - Cardsmart cards. They are owned by Fleetcor who is a holding company and listed on the stock market.

I’d like to know whether I am legally liable for the full amount.

I have asked the bank who closed it, they are coming back to me on Monday. They did confirm that the direct debit was created on the 21st Dec and closed the next day. One card fee of $2.59 had been withdrawn from my bank on the same day it was created.

My failing was I should have read the original terms in detail to know first that the card fee applies every month and that would have alerted me to something being wrong when only one transaction ever was paid.

Regardless of the wrongs of the other party, I will probably still be legally liable. My policy is if there is any dispute, I wish to know what legal wrongs I am guilty of before settling any debt.

Yep I’ve made a lot of stupid mistakes and I trusted too much. I think thats a big part of how people get into debt. They just assume the company is taking care of things. That was a hard life lesson. Never take any thing for granted and make sure the parties you deal with are complying with their obligations.

Today, you just have to have at least basic legal knowledge and also a lawyer who specialises in your area of business. Those things are equally as important as being able to read and being financially literate.


#6

Looks like 2 things here Ford. One is all the terms and conditions of the card, how it is used and fees for the use of the card and the banks are not a party to that.

The second is the cancellation of the Direct Debit and from what I can see you are asking details from the bank that you use to see why the DD was cancelled.

Happy to help some more after you get the information around the DD component.


#8

Ford, I will await your next update as to the next path you could take.


#10

Ford, I have gone on the website for Card Link and I have tried to download the Direct Debit form and on that form there should be some Terms and Conditions around notifications that they must provide when initiating the Direct Debit, you could check to see that they have met those conditions and if not then you could ask them why they have not met those conditions.


#12

I can only answer what a bank would have seen and what they would have reported to the Initiator. So the DD Initiator would have sent through a Direct Debit to your account, the bank would have advised via a dishonour reason code that the DD was cancelled. I would then doubt that the initiator would keep sending through a DD as they would get the same response unless you advise them it has been re opened.

What you need to find out now in relation to your terms and conditions on the card, do they have a responsibility to advise you that they can not debit your account any longer as the DD has been cancelled.

Afraid to say it is looking as though the ball is firmly in your court and I can not see where this could lie with the Card Smart company unless some where in the T’s and C’s it advises that they have to advise you when they are unable to receive funds from yourself in that DD process.


#14

Ford,
Here is what I can see from this whole process.

In December there was a card fee and that got paid, so your card balance would have then been zero. In the contract you have with Cardlink there is a monthly fee of just under $3 whether you use the card or not.

You have then in December cancelled the Direct Debit, have not informed Cardlink of this and also you have not cancelled your card either.

From a Direct Debit perspective, any subsequent Direct debits will never post to your account as the bank has no authority to post them to your account and these would have been dishonoured with either a reason code of 01 Payment Unauthorised or 05 Authority Cancelled. This dishonouring code tells Card Link of the status of their request, so that is the bank informing Card Link.

So from a banks perspective here, whoever this bank is has done nothing wrong and for every attempt that Card Link make, tells them by way of dishonour the reason for non payment.

You have advised insufficient funds was what you were being told by Card Link, I can not see where that would have come from, you could ask your bank or Card Link for the dishonour reason code that was being returned, but honestly it is semantics in relation to the payment, it is still not paid.

In February card Link did advise yourself that payment was rejected by your bank and at that point you should have investigated further. You say that they hadn’t been notified by the bank, well yes they have hence why they are saying the DD was rejected by the bank, that is because the bank has dishonoured the attempt and will dishonour all other attempts.

To sum this up, your bank (whoever that is) has done nothing wrong and has adhered to all of the Direct Debit rules the banks must operate under. Card Link did inform yourself that payment has been unable to be effected, you also then re used the card knowing that this would then incur a cost that you had to pay for. Yes you may have forgot that you cancelled the Direct Debit, but Card Link informed you by way of text in February that they could not Direct Debit your account.

Not sure what other debt communication you did or did not receive between Card Link and yourself, and I can sympathise with the level of fees being charged for non payment, however as you say it pays to look at all of the terms and conditions, should you not meet your obligations in paying the debt.

In having this difficult conversation, there has been a bit of responsibility on yourself that had you acted earlier would have saved yourself a whole lot of financial stress and trouble.

I hope you could come to some sort of agreement with Card Link, around the re payments, in relation to the Direct Debit component, there is nothing untoward here and is between yourself and Card Link.

I wish you well Ford and I am more than happy as always in BNZ Community to answer any questions where I can add value to any subject that I have a good understanding.


#16

Ford from your last update I will focus solely on Direct Debits and try and clarify things here.

One piece that you state is that they tried again on 20th June but declined (your DD is still closed) you advise it was Insufficient Funds (who has advised this description, this should have been Payment Unauthorised or Cancelled). They can keep trying as they are still entitled to the funds as per terms and conditions, but if you have not advised that the DD has been re opened then not sure why they kept trying, but nothing wrong here.

You talk about 9 months, and under DD Rules if they are what is called a Preferred Initiator then after 9 months this will re load and open up the DD.

You have also talked about it not hitting your account, the DD will only hit your account (post to your account) if the Authority is open, if it is closed then the banks dishonour back directly to the Initiator and this never hits your account, but the bank would have a record of the dishonour it sent to the Initiator.

So in relation to Direct Debits all has been adhered to here, I would just like some clarification in relation to this Insufficient Funds as this gives a wrong view on the status of the Authority.


#18

Ford,
There does look like wrong descriptions being given on why the DD was declined. From the information you have provided the answer as previously advised by myself is that the DD would have declined for Authority Cancelled or Stopped. Regardless of how much money you have in your bank account, whether you had $5 or $5,000 it would not have been able to have been deducted from your account as NO Authority was now in place.

A Closed DD will stop a company taking the funds but it does not stop them sending through the transaction to the banks for what they are entitled to.

The 9 months stand down is talking about a Preferred Initiator and this is what would happen in opening up the DD again after 9 months.

I can see that you realise that if you had only kept the DD Open for the monthly fee then it would not have snowballed to where it is now.

I have covered off all I can in relation to Direct Debits and I hope that there is some light for you at the end of the tunnel.