The Grumpy Old Man

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Whatever Happened to Standing Orders and Should We Trust Direct Debits?

Standing Orders seem to be out of favour and replaced by Direct Debits, but who is in control of them?

Years ago one of the facilities that was available with your bank account was the standing order. I suspect that these are still available but are only used in a very small number of situations. One of the nice things about the standing order was that you, the customer, were in total control of the situation. You initiated the process, you fixed the amount payable, you fixed the date it would leave your account and the whole process could be stopped by you simply contacting your bank.

I have no doubt that insurance companies, particularly those offering life policies requiring a regular payment, found they were spending a lot of time verifying that they had received payment each month. At this point they applied a variation of ye Olde eighty twenty rule. (QV) They realised if they could request payment from the bank then the large majority of these requests would be paid. Only those that the bank declined to pay would be identified back to them. This would represent a far smaller list for them to process than was previously the case. It was also soon realised, if they could generate a single computer file for each bank and use it to request payment from them, then the only thing they would have to follow up afterwards were the non-payers. Clearly, the banks would notify the the insurance companies who these customers were. It can be seen that they were getting all of the information they required for far less effort than had been expended previously. In fact one could say that the banks were doing much of the insurance company's work for them.

The system that was set up with the banks was called Direct Debit, or just DD for short. The concept was sold to you, the customer, as being to your advantage. Grumpy firmly believes that is a load of old hoo hah!

I must confess that Grumpy uses them as little as possible. After all, why in the world should he allow someone else to have access to his bank account? Looking back at the way DDs started Grumpy believes that many of the safeguards that were put in place to protect the customer have since disappeared.

When they were first introduced the customer would define the amount of the DD, the date on which it was to be activated, and the period over which it would operate. It was then sent to the recipient of the money to produce the document as his authority for the first payment. Should you wish to cancel the DD for whatever reason, all that you needed to do was to contact your bank. It was not absolutely necessary, although clearly a courtesy, to contact the recipient. The banks went to great lengths to reassure all their customers that, in the event of a problem, the money would be reimbursed to the customer while the problem was resolved.

Over the years it has become abundantly clear to Grumpy that many of these safeguards have disappeared or been so watered-down as to be totally valueless. In fact, from some of the reports I read in the press it seems that some companies, once they have a direct debit, will raid your account for however much they like whenever they like. In addition to this, to cancel the direct debit you now have to do it with the originator (insurance company, utility supplier.......) and even that does not work all the time.

Grumpy has personal experience of this when he cancelled a number of weekly DDs, in writing to both the bank and the recipient. The recipient carried on generating DDs for three or four weeks after they were cancelled and the bank tried to pay them. As I was in the process of closing the bank account no funds were available in that account to pay the DDs. The bank returned them to the recipient and charged me twenty-five pounds. As this was for the sale of goods to our shop, the recipient was not pleased and HE charged me twenty-five pounds as well! At the end of the day I wrote to both the bank and the recipient saying that between them, they were generating chaos and I would do nothing for one month to allow things to stabilise. After that time had elapsed the recipient had stopped raising DDs and had been paid most of what was due to him.

In calculating the final amount due, Grumpy claimed back all that the supplier had tried to charge him (for a 'failed' DD) and also charged them twenty-five pounds for each time he had done it! In respect of the bank they had a similar letter, the only difference being, they were also charged twenty-five pounds for Grumpy having to write the letter. He had managed through all of this to ensure that he owed a small sum to both bank and supplier. They were both told that the letter and cheque constituted his full and final offer of settlement of all outstanding debts. Should they cash the enclosed cheque, that act would constitute acceptance of this final offer. Both cheques were cashed and that was the last I heard of the matter.

I view with great concern the number of companies who now use DDs as opposed to other methods of payment. What is also of great concern is for many of these companies, the only way they will now do business with you is through the DD route. These companies get into all sorts of problems particularly when one tries to cancel. I have seen reports of the bailiffs being sent in to recover monies that arose after the DD had been cancelled. I have seen reports of astronomic DDs being sent to the banks again, after contracts have been cancelled or in some cases for energy supplies based on the company's own estimate of usage.

I sense that the system is operating under a huge strain and is being fiddled with to suit the needs of the supplier. It seems the protections originally afforded to the little guy have been whittled away. It is iniquitous that organisations have become so large that they should rule the roost in this way, riding roughshod over the little guy.

Once again I ask you who controls these huge international monopolies? Do you really want Uncle Tom Cobley and All to have free access to your bank account? No, I am sure you don't, so resist this rush to throw away your control of your affairs!

There is a common theme running through this and other grumps. Click here to .....read more......