Friday, April 06, 2007

Direct Debits - Fiend or Foe?

Wonderful - Easter weekend, no Tory morons, no Nu-Lab cretins (Terry didn't approve any comments yesterday - if he maintains his foolish consistency, we shouldn't see anything new until Tuesday, at the earliest), so back to moaning about the things I set this blog up to be ignored about.

One of the miracles of (not that) modern banking - the Direct Debit. According to BACS, they are "one of the safest ways of paying your bills." Safer than standing orders, because they should only be called upon when you actually owe the money and better than standing orders because they allow variable payments.

Except that there is a world of a difference between theory and practice. Think about what a Direct Debit mandate does. We all deal with various organisations whose fundamental competence we doubt (eg our local unitary authority, energy utility and, if you are south of the Tweed, water company). DD gives the minimum wage Sharons or Dwaynes in each of those (or, worse still, their computers) an unlimited tap into your current account. If they ask for the full sum of your available balance, they will get it. So DD is not a risk free endeavour.

I first began to suspect that all was rotten in the state of DD a couple of years ago. At the time, I was being paid into a personal account and then transferring most of the dosh pretty much immediately into a separate joint and several (with my wife) account. I cannot remember which insurance policy she was renewing but my wife told me that the monthly payment option had been reasonable and that there would be a new direct debit appearing. True enough, one did. On my account.

Just to be clear - my wife had managed to set up a direct debit on an account to which she was not a party. No trouble, no "we already know who you are but you are going to have to 'prove' it anyway" KYC bollocks. On the phone, to an insurance company, and a DD against my account. All she needed was my account number - not regarded, in the banking world, as confidential data. Now, we were going to be paying the money and it wasn't of an great significance which of the two accounts it came out of. I was just staggered that the system permitted this. A bit of judicious investigation, back at work, realised my fears - this was not a one-off error on somebody's part. There was no security control step that had been skipped. This was the system working the way it was designed.

And then this week. Well, a couple of days ago, in a brief respite from blogging work, I checked my bank account balances online. Much to my surprise, one of my accounts was overdrawn. This was a particular shock as all I now use that specific account for is to keep £50 or £100 in case I am "caught short" and need to visit an ATM in a hurry. What had happened?

It was, I admit, partially my fault. I had a savings contract for £100 per month which had completed at the beginning of March. At that point I could have, and probably should have, cancelled the DD. But wait? Isn't DD a pull not a push mechanism? The intermediary organisation shouldn't have demanded money that they weren't owed. Or so you would have thought.

So, clearly having to do a bit of grovelling, I called my bank's telephone banking - not a problem, they mentioned the direct debit guarantee and just asked me to call the intermediary first. So I did. What did they suggest? Once they had confirmed that they had made an error, they would send me a cheque - 5 to 8 working days.

Admittedly the amount of money is not significant (to me, at this point in my life), the bank are happy it was somebody else's error, but this is simply not the way the system is supposed to work. The safety net put in place has not functioned. This is another aspect of UK banking, amongst many, that the normal public need to be extremely wary of.


Oh, and I have, now, cancelled that direct debit.

1 comment:

Anonymous said...

this fraud will continue because the banks own the british government

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