A reader complained recently that a debit order had been erroneously taken from his bank account. When he complained to the bank he was told that it could not prevent further debits and he should close his account and open a new one.
The staff member did not offer to try and reverse the debit order or to recover the amount withdrawn.
It may come as a surprise to many bank customers who have had similar experiences with their banks that they have the right to reverse a debit order and that they can implement a stop-payment instruction against a debit order for a period of time.
Advocate John Simpson from the Ombudsman for Banking Services office says the rules around debit orders are quite clear, but they find that what happens in practice is not always the same.
As consumers we need to ensure that we know our rights and to challenge banks when they fail to deliver.
These are the rules banks need to adhere to, according to the Ombudsman for Banking Services:
- Customers can give their banks written stop-payment instructions to prevent debit orders for specific amounts. When a debit order is returned “payment stopped” on the instruction of a customer, the user (service provider) may not process further debits under the system.
- An instruction to cancel a debit order only remains on the bank’s system for a limited period of about three to six months. After this period a user may again attempt to debit the account and it will be processed. It is important that clients check their statements regularly for fraudulent debits.
- A customer can instruct his or her bank to reverse a disputed debit order. If the disputed debit order is reported within 40 days of it appearing on the account, the bank will immediately reverse it.
- If a debit order is unpaid on two consecutive occasions for lack of funds, the user must remove it from the system.
- If a debit order is unpaid for lack of funds, the user may resubmit the item but may not adjust the value of the transaction.
- If there are not enough funds in the customer’s account to meet a debit order, the company can re-submit the debit order the next month, but it may not adjust the value of subsequent transactions to recover arrears.
- Users must produce auditor’s certificates at annual intervals confirming to the banks the existence of their authority to debit the customers’ bank accounts.
According to the ombudsman, the banks have introduced a process to identify those companies who have not conformed to the rules of the debit order system. These companies would then be disqualified from further use of this facility.