Alex contacted the bank to ask why the direct debit payments had not been made.  She later said she also asked the bank to cancel the direct debit facility, but the bank said she asked for the facility to be reinstated. The following month’s direct debit was paid, but a cheque paid into the account was dishonoured and the account went into unauthorised overdraft. About this time, Alex changed her address but the bank was not notified of her new address. The bank statements and letters about the unarranged overdraft did not reach her.  After failed attempts to contact her, the bank closed the account, listed the debt and referred it to a debt collection agency for recovery.

After receiving a letter from the collection agency some months later, Alex contacted the bank. She asked for an explanation of the debt. When she said she had cancelled the direct debit facility, the bank told her that customers could not cancel direct debits. Rather, it said, the company with the direct debit authority had to initiate cancellation.

Our investigation

The Code of Banking Practice makes it clear a customer has the right to advise his or her bank to alter or cancel a direct debit facility. That Alex had received such incorrect advice raised the possibility that she had indeed asked the bank to cancel the direct debit facility, but had been ignored.

It was clear the bank should refund the collection costs Alex incurred when the direct debit facility was not reinstated after the account was inexplicably closed and reopened.  It was also possible Alex had tried to cancel the direct debit, but the payment by the bank had gone to the finance company to pay off her loan.

Outcome

We concluded that the best solution would be for the bank to recall the debt from the collection agency, remove the debt listing and write off the entire debt. In exchange, Alex would not pursue repayment of the collection costs she had incurred. 

The complaint was settled on this basis.