Cancellation instructions neither clear nor cause of any loss

Direct debits,
HW Ltd had six insurance policies, with premiums for each paid by direct debit from separate accounts.
October 2011

HW Ltd decided to change insurance companies, so its secretary, Sarah, sent a letter instructing the bank to cancel direct debits to its insurance broker. The letter didn't specify account numbers, and when the bank checked the company's accounts it couldn't find any direct debit authority in favour of an insurance broker.

A bank officer called Sarah, and it became clear the direct debits were paid directly to the insurance company, not via the broker. Sarah said she told the bank officer to cancel all six direct debits on all six accounts. The bank officer said Sarah gave only one account number, so the bank cancelled only one direct debit.

When the company discovered that five premiums had been paid the following month, it wrote to the bank asking for the premiums to be refunded. It also followed up the matter with its insurance company, which refunded the overpaid premiums to HW Ltd’s insurance broker. However, the broker refused to return the money, saying it had been offset against an outstanding bill – a bill HW Ltd disputed. Being unable to recover the money from its broker, HW Ltd complained to the bank that it had not followed its instructions to cancel all six direct debits.

The bank said it could find no evidence of any specific request to cancel all six direct debits. It said the instructions in Sarah’s letter were unclear, prompting it to phone her. It also said computer records showed the bank officer viewed only one of the company's accounts when he spoke to Sarah, suggesting Sarah had directed that the bank cancel the direct debit from only one account.

Finally, the bank said the company hadn't suffered a direct loss because the insurance company had refunded the premiums to the broker, and the money had been offset against an outstanding debt. Any dispute with the broker about how the money was used did not involve the bank.

Our investigation

HW Ltd was dissatisfied with the bank’s response, and one of its directors complained to us, but only after a gap of more than two years. We interviewed Sarah, who no longer worked for the company, about her recollection of the phone conversation. She maintained she instructed the bank officer to cancel all of the direct debits in all six accounts. We had no reason to doubt Sarah, but we also had no reason to doubt the bank officer’s account, so we could not find that Sarah had given clear instructions to cancel all six direct debits. Furthermore, we found that Sarah’s letter to the bank did not contain clear instructions to cancel all of the direct debits, and that in any case HW Ltd did not suffer any direct financial loss as a result.


We did not uphold HW Ltd's complaint.

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