Direct Debit Trap !

We are finding that an ever increasing list of services are only available if we agree to pay the monthly fee by way of a direct debit payment from our bank account.  The problem is that each vendor seems to have their own rules on how cancellations will apply and every bank applies different thinking on who has the authority to cancel further payments.

A trading company has just had a $ 200,000 fine imposed because it was found guilty of " misleading " it's customers in applying the rules of trading it imposed on sales.  In particular, it insisted that lay-bys could not be cancelled and direct debits would continue - even after the final payment had been made.

This company allowed it's customers to spread the cost of Christmas by selecting from a catalogue of food and presents and pre-paying by way of regular monthly payments.  It seems that each years input did not cease with the pre-Christmas delivery and those direct debit payments continued to amass funds for a similar trade for the coming year.   Once you became a customer it was extremely difficult to withdraw from the scheme.

This raises the question of contract terms.  Unless this is clearly stated it tends to be resolved only on the interpretation in the minds of either the company or the customer, who may have entirely opposite thoughts.  In this case, the court found that the interpretation adopted by the company was deliberately misleading.

Unfortunately, direct debit seems to have no clear rules applying.  When a customer changes the source of supply of a service it is unclear whether that customer must cancel the direct debit for the cancelled service, or if that would automatically be done by the previous supplier.  In many cases, the customer only discovers that the direct debit is still applying when he or she checks their bank statement - and starts the procedure for a refund.

The rules that apply to cancellations also differ between banks, credit unions and Building Societies when it comes to cancellation authority.   Some insist that these can only be cancelled by the receiving party while others grant that to the payee. Some will take action only on a written instruction while others will act on verbal instruction.  It all seems to change from institution to institution.

The recent sharp increase in postal charges seems certain to increase direct debit as the required method of payment for many more services, and a new trend is emerging where even annual fees now attract a discount if the customer agrees to " automatic renewal " by lodging credit card details to come into effect on the renewal date.

It is claimed that this " lock in " renewal discount is a reward for avoiding the cost of printing and postage to remind the customer that renewal will shortly occur, and once in place it replaces the option of renewal decision and bonds the buyer solidly to the supplier.  Cancellation then becomes a necessity of direct action on the part of the customer.

It would be helpful if the application of direct debit was covered by Federal law, to remove the different thinking that applies state by state and by the various payee institutions that process these payments.  A clear set of rules needs to apply to what seems likely to become the future method of payment for most personal and household services as we adope to what is becoming the " electronic age " !