I apologise in advance for the length of this post but previous posts to this subject evidence the fact that there are a loss of misconceptions around about the Direct Debit system. As a Direct Debit Originator, I will try to shed a little light on the procedures.
Indeed there have been many developments within our banking system that have never been publicised - such as the fact that no cheque for less than £10,000 is ever examined at all, it is simply paid. It is therefore quite possible for a completely unsigned cheque to be paid.
I found this out when I suddenly noticed that two Direct Debit payments had been taken from our “Clients” account This is an account with “Trust” status. This means that our Bank recognise that the money in this fund is not ours, but is held on trust for others. The effect of this is that the Bank would be unable to use any of these monies as offset against any of our liabilities. What had in fact caused the Direct Debits to be taken was that an Agent of ours, a Mortgage Broker had been completing Direct Debits for a Mortgage and a Life Assurance policy at the same time as our Direct Debit for Mortgage Payment Protection Insurance. On his Client’s Direct Debit Instructions for the Mortgage and Life Assurance payments he wrote our bank details. I asked our bank for an undertaking that no Direct Debits would ever be taken from our “Clients” account. They were unable to give this undertaking.
It is important to understand that any Direct Debit Originator can set up a Direct Debit on any account at any time, either legitimately, by mistake, or fraudulently. The first the payer will know about this will be when the money is taken.
The Direct Debit system offers the payer protection against mistake or fraud ONLY VIA THE DIRECT DEBIT GUARANTEE.
Because the system actually empowers every Direct Debit Originator to set up as many fraudulent Direct Debits as they wish, and their Bank has to guarantee to make these good immediately upon challenge from the payer’s Bank, the Originator’s bank is at severe risk, and will investigate thoroughly all applications to become a Direct Debit Originator, and take steps to protect itself.
When our Company was given Direct Debit Origination facilities by our Bank, top cover this, my wife Gwen and I had to give personal guarantees as well as our Company’s guarantee, and provide security to the Bank to back both of these guarantees.
The only way to safeguard yourselves is to examine your bank statements regularly and in depth.
If a Direct Debit has been taken from your account without your permission, you should immediately require your Bank to honour the Direct Debit Guarantee they gave you, and to reimburse you immediately. They can then go to the Direct Debit Originator’s Bank and request the money back from them. If the Direct Debit Originator thinks that they collected the Direct Debit correctly, they can provide proof of this to their Bank.
The wording of the Direct Debit guarantee is very clear.
This Guarantee is offered by all Banks and Building Societies that take part in the Direct Debit Scheme. The efficiency and security of the Scheme is monitored and protected by your own Bank or Building Society.
If the amounts to be paid or the payment dates change the Originator will notify you ten working days in advance of your account being debited or as otherwise agreed.
If an error is made by the Originator or your Bank or Building Society you are guaranteed a full and immediate refund from your branch of the amount paid.
You can cancel a Direct Debit at any time by writing to your Bank or Building Society.
Please remember that it is up to you to challenge a transaction, WITHOUT YOUR CHALLENGE NOTHING WILL HAPPEN.
