Non DDM Charges - MPs Letter

[buzby]

In an effort to push for the outlawing of non-DDM charges, I've sent the following to my MP. If this affect you, you may like to do the same in the hope we can eventualy outlaw firms who try to shift the cost of payment processing from themselves to consumers.

 

 

Dear [MP name],

Subject : Payment iniquities & social exclusion

I write in connection with a growing problem that is affecting consumers not only across our constituency, but the country as a whole. Utility and service companies have been increasingly adept at modifying their payment systems to ensure that;

 

(a) Only customers prepared to provide unrestricted access to their bank accounts – on a ‘unspecified amounts / unspecified dates’ basis may purchase goods or services from the supplier, meaning those without a bank account are unable to purchase goods or services from that retailer or service provider. And

(b) For customers unwilling to provide the aforementioned unrestricted access to their bank account, firms levy additional charges which, it is claimed, cover the ‘additional costs of processing payments made by alternative means’. For those having the temerity not to allow the vendor unrestricted access to their account to take payment, many firms have structured a series of additional charges which become a profit stream in its own right. A few examples of these are noted below, there are many more;

 

Sky Television £48.00 pa Ongoing

British Telecom £18.00pa (from 1st May 2007)

NTL/Telewest/Virgin £60.00pa (from 1st February)

British Gas £60.00/£20pa (from 1st May 2007, billed Monthly/Quarterly)

Carphone Warehouse £42.00pa Ongoing

 

Consumers are being held to ransom, and are either being excluded from making purchases (Esure, the insurance company will only accept DD or card payments, cash or cheque are not acceptable). A further consideration is that consumers are being told that they (not the supplier) are being held wholly responsible for the costs of processing payments. This is iniquitous, yet when challenged through the courts these firms agree to waive the charges.

 

The usual response from firms employing these tactics is that it ‘costs them more’ to process payments by other methods. Whilst it may be true PayPoint, Cash and Cheque payments may be the subject of a service charge, electronic payments remitted by BACS, PC Banking and Standing Order do not – yet these customers who remit the full amount due, are still penalised. Similarly, assurances that consumers are protected under a ‘Direct Debit Guarantee’ are false. This arrangement does not cover consequential losses incurrent by 1 incorrect debit causing perhaps five other payments the same day being rejected. The incorrect debit is remedied, but the others that failed as a consequence are not, with the banks and suppliers lining up to levy punitive ‘failed DDM’ fees.

 

Whilst I accept that each firm has the freedom to conduct business in the way it sees fit, we are reaching a dangerous precedent when consumers are either being disenfranchised because they do not have a bank account, or financially penalised because they are adult enough (or choose) to look after their own financial affairs without external intervention. Previously debts of any kind can be paid using coin of the realm – however there is no protection for consumers who are being routinely bullied into losing financial control of their affairs, simply because fees are being applied for non compliance. There may be other issues, whether the imposition of these additional charges are in fact legal. Currently they have to be challenged individually, what would make more sense is to legislate to prevent such tactics, so that the financial bullying ceases.

 

May I ask you to use your endeavours to enquire whether consumers have any possibility of being protected from such manipulation, and if no statute exists to protect users from this unwelcome trend, whether you would consider raising this matter within Government to protect consumers from being exploited in this way?

 

Yours sincerely,

[Guest NATTIE]

That is a good letter and well pointed out that Direct Debit Fees are aimed at those who through either choice, bank charges and the like HAVE to pay with cash and for that they are penalised.

[buzby]

My MP has responded by saying that she didn't realise so many firms were operating in this way, and has raised it dsirectly with Alistair Darling's department - she'll advise when she recieves a response, and said it usually takes 4-5 weeks.

[blacksheep1979]

the trouble is that these fees are often worded as a discount for people paying via dd and companies are free to use any discounted style marketing they choose (obviously within reason). If the UK tries to stop this they will probably find some eu legislation that lets them get away with it.

[buzby]

If you look at the current crop, they've become careless, it is NOT a discount for paying by DDM, but a surcharge for paying by everything else. Not only this, a DDM means surrendering total control to your bank account, and I'm sure if we look at the Human Rights legislation, we can find something in there to challenge them!

[Spiceskull]

the trouble is that these fees are often worded as a discount for people paying via dd and companies are free to use any discounted style marketing they choose

I agree with the logic, but in so doing these companies are discriminating against those people who do not have a bank account - for many reasons - and therefore the discrimination is unlawful...

 

I liked Buzz's letter, and will send a slightly amended version to my own MP...he is very hot on bank charges, so this will give him some extra cannon fodder the next time he tables a question to parliament...

 

Well done Buzz...

[Movingon]

I agree with buzby - it doesn't matter a damn how it's worded; I'm pretty sure that presented with the right evidence and persuasion any court would find that these are a penalty.

[buzby]

I've an update on this, as I've now spoken with Trading Standards, and the OFT - the latter (of course) being extremely negative, by pointing out it is not their business to 'deal with individual complaints'. I'll add to the thread with the relevant points made by both parties shortly.

[buzby]

The OFT opened a new office in Scotland last month, so feeling the office could do a little to kick-start this complaint, I wrote to the Scottish OFT representative, with a slightly modified version of the letter at the top of this thread.

 

This was responded to from the usual OFT correspondence section, saying my letter had been passed on by the Edinburgh office, and stating that the OFT do not act on individual complaints from consumers. My complaint had been 'noted' in their database, and should the matter be raised for further investigation, my concerns would be passed to the relevant persons looking into it. So, it will reside in the virtual equivalent of a locked filing cabinet until someone with the ability of raising a 'super complaint' before this issue will be taken seriously by the OFT.

 

I have to admit to feeling disappointed that the OFT takes no interest in following up complaints by individuals unless a certain seniority is reached, just as well I took it up with Trading Standards and my MP who has raised it with Alistair Darling.

 

In the meantime, anyone wanting to raise this issue would be well advised to pursue your MP and Trading Standards in the first instance, as the OFT just don't want to know.

[buzby]

I've now had a response from the DTI (Department of Trade & Industry), and the Rt Hon Ian McCartney MP in response to the letter above to my MP. Whilst the response isn't the one I hoped for, reading between the lines it seems we ARE being told to handle the matter in a DIY fashion. Here's the text;

 

To: Jo Swinson MP

Re: Payment Charges

 

Thank you for your letter of 19th February to Alistair Darling, enclosing correspondence from your constituent [buzby] about payment iniquities and social exclusion. I am replying as this matter falls within my portfolio. I apologise for the delay in replying.

 

As [buzby] notes, companies are generally free to use whatever contractual terms and conditions they consider reasonable. If prospective customers are unhappy with these they can attempt to re-negotiate the terms in question or go elsewhere. There are, however, some legal safeguards in relation to unfair contract terms. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) provide protection for consumers when entering into contracts, Companies who deal with consumers and use standard form contracts must ensure they do not use unfair terms. Under the UTCCR, an 'unfair term' is defined as one which, contrary to the requirements of good faith, causes a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer. If a court decides a contract is unfair, it will not bind the consumer. The Office of Fair Trading (OFT) has a duty under the Regulations to consider complaints made to it about unfair terms. [1]

 

Although the OFT cannot intervene to resolve individual disputes, it can act to stop the terms it considers unfair, if necessary by seeking an injunction through the courts.

 

Turning to the practice of companies imposing different levels of charges upon customers who pay for their services by direct debit and those who do not, direct debit is often the most cost-effective payment method for companies because, among other things, it guarantees payment [2] and reduces invoicing costs. Companies often offer a discount therefore on their standard charges for those paying by direct debit. [3]

 

The Government does recognise however the real and significant costs faced by those householders without access to bank accounts, including those incurred as a result of their inability to make savings on utility bills by paying by direct debit. The Government has therefore been working with the banks to address the issue of access to bank accounts. All the major high street banks now offer a basic bank account. These have been specifically designed to meet the needs of those who do not have previous experience of banking or electronic money management, and are a key product in increasing the uptake of banking. Basic bank accounts provide essential services, including bill payments by direct debit, paying in cheques and cash, making cash withdrawals 24 hours a day, and receiving income and benefit payment. In addition, they do not allow customers to go overdrawn by more than a small amount. [4]

 

My interest in social exclusion has simply to highlight that those without bank accounts had to way to avoid the charges, I had no interest in the Government somehow making it easy to open accounts so that you CAN pay by Direct Debit, a clear case of the tail wagging the dog.

 

However, I make the following observations;

 

[1] My letter to the DTI was met with the anticipated response, they do not act for individual complainants, but would be 'monitoring' the situation. So no change there.

 

[2] A DD guarantees nothing - except should it fail for any reason it gives both the bank and the supplier an opportunity to charge non-performance fees should the debit not be made. WITHOUT A DD in place, exposure to these additional charges a removed.

 

[3] Dream on! These days there IS no discount for paying by DD, quite the opposite, as if you don't pay by DD everyone else is surcharged. This is NOT the same as getting a 'discount'.

 

[4] Does anyone know when a bank didn't allow a DD to be taken because it would cause the account to go overdrawn? Invariably the debit would be allowed, and you would receive a charge for letting the account GO overdrawn! The alternative is to block the debit, and charge you a fee for so doing - a win-win situation for the banks, and lose-lose for the consumer. Why this didn't seem worthy of note eludes me.

 

If we are being encouraged to to follow the UTCCR by the DTI, who are we to deny them this route? The modified Watchdog letter and a notice to those firms who charge the increased fees for non-DD payments may find that frequent court action(s) and claims for cost with each monthly billing will quickly eat into their profits.