Many people go to cancel a Direct Debit when they begin to receive bad service from a supplier. Verne Halom considers the pros and cons of such an approach.
Direct Debit as a payment method has been part of British life for over forty years,
with the first Direct Debit payment being made in 1970. At the time, BACS, the consortium of 16 UK, European and US banks and building societies that own the UK payments infrastructure was called the Inter-bank Computer Bureau, and payments were processed using magnetic tapes. Over the first three decades, Direct Debit has slowly grown, and over the last decade take-up has increased markedly, partially down to the public's move away from cheques.
One of the reasons that Direct Debit has proven popular is the fact that there is an element of protection when using the service - the Direct Debit Guarantee. The guarantee gives cast-iron protection against any errors in payment, whether this is down to the amounts, date, or no notice being given, and these safeguards give the payer the right to reclaim any erroneous payments direct from their bank for an immediate refund. A payer can also cancel the instruction to pay an organisation at any time.
While the power is in the hands of the payer with Direct Debit, when should you cancel an instruction with the bank? Anecdotal evidence from sources such as Twitter, Facebook and internet forums shows that many people are not averse to cancelling payments to companies for service issues and when they want to cancel a contract. Frequently, lines such as "I've cancelled the Direct Debit - I'm sure you'll call me now!" are seen being directed at customer service teams at even the largest corporations.
This wisdom in taking such an action is questionable. Many Direct Debits are set up in order to pay for goods and services that have been arranged via a contract; for example a mobile phone may be subject to a twelve month minimum term contract with a 30 day notice period to cancel after the initial twelve months. Cancelling a Direct Debit and allowing payments to be returned unpaid will quickly put you in arrears and potentially in default with the service provider leading to complete loss of service, debt collection letters, and as many contracts allow service providers to provide data to credit reference agencies, an adverse affect on your credit rating.
When you experience difficulties with a service provider, it is important that you do not stop making payments as this will only have a detrimental affect on your service and credit rating. Instead, try and make contact with the company conerned by telephone or e-mail to amicably resolve your issue. If you are looking to cancel your service, many companies will take notice by telephone, but try to obtain confirmation of cancellation in writing for your own records.
If making contact by telephone or e-mail fails, or cancellation cannot be taken over the phone, a letter via snail-mail (preferably registered or signed-for) is the next step to take. Write to the head office, or office described in the company's terms and conditions/complaints procedure ensuring you follow any of the procedures described. If complaining, briefly state the problems you have been having, and what action you would like the company to take. It is important to be brief with your complaint, trying to keep the complaint itself down to about a page and a half. If the complaint is complex, keep the content of the letter to just the salient points, attaching a timeline or additional information on separate sheets.
If after completing the above steps, you find that your issue is still not resolved, check the service provider's complaints procedure; many have agreements with independent arbitrators such as the Financial Ombudsman for financial firms, OTELO for telecoms firms and Ofgem for energy companies. These independent bodies will look at the complaint and issue a ruling to the service provider, which they are bound to follow. While the decision is binding on the service provider, it is not binding on the consumer, who remains free to take independent legal advice should they so wish.
While cancelling a
Direct Debit over a service or contract cancellation issue will undoubtedly generate a speedy response from a service provider, this method of communication should be very much a last response as the unintended consequences can be both negative and long lasting, especially where a credit file is concerned.
