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Direct debits

13 September 2011

Not receiving a bill that you know will be the same month to month can be convenient, even environmentally friendly, but as complaints to the TIO demonstrate, agreeing to pay your account by direct debit can have its pitfalls.

It’s becoming a common practice for telcos, especially broadband and mobile providers, to condition contracts on direct debits, either through a bank account or a credit card. This is because charges are generally fixed, such as “minimum spends” on mobile capped plans or fixed internet charges.

While this works well for many consumers, it’s very important that you inform yourself about your contract’s terms and conditions, as any excess usage charges can leave a hole in your account balance, and leave you with a headache.

Complaints about direct debits

Against new complaints logged between January and March 2011, the TIO recorded 1,092 direct debit issues. This was an increase of 32 percent from the previous three months. Between July 2010 and February 2011, the TIO recorded an average of 289 direct debit issues per month.

The most common complaint issue relates to direct debits not authorised by the customer. This has accounted for 44 percent of all the direct debit issues that the TIO has logged since this financial year (2011) began. This usually means a customer may have gone over their minimum spend or download quota and that has attracted excess usage charges. The customer may have authorised their provider to debit their normal monthly fee, but may complain that they have not given the authority for any additional debits.

According to the Telecommunications Consumer Protections Code, if a consumer pays their account by direct debit and their normal monthly fee does not vary, the provider is not required to print a bill if they inform their customer. However, a provider must ensure that a direct debit customer can receive a bill on request.

Other common complaints around direct debits are:

  • the company continues to charge the direct debit even after a customer says they have cancelled an account or arranged an alternative payment method
  • the company does not charge the direct debit on the agreed dates, leading the consumer’s account to become overdrawn and both the bank and the provider charge a dishonour fee
  • the company does not allow enough time between sending a bill and actioning the direct debit, causing the customer to receive the bill after their account has been charged.

In many cases, these complaints can be compounded by what consumers see as poor customer service.

Direct debit issues (new complaints)
Jul-Sep 2010
Oct-Dec 2010
Jun-Mar 2011
Not activated
130
119
133
Not authorised
316
355
586
Not cancelled
232
188
221
Prior to bill
38
45
43
Wrong date/frequency
121
116
109
Total
837
823
1,092
% change

-1.7
32.7

What to do

It is the TIO’s view that a telco should always give the customer notice before direct debiting any non-regular sum from the person’s bank account or credit card. If a consumer disputes any charges on their account, the provider must not debit the disputed charges while the complaint is being investigated, either by the provider, the TIO or another agency.

There are some actions consumers can take to avoid any direct debit surprises.

When you take out a contract: check your contract carefully. Inform yourself of the consequences or costs of exceeding your cap or data allowance. Some contracts stipulate high fees per megabyte over your quota, especially on smart phones. Also, inform yourself of what payment options are available to you. You might also like to consider whether a plan that attracts excess usage charges is the best for you. Some internet providers offer plans where any data usage above the included quota is slowed down, limiting the performance of the service rather than incurring excess usage fees.

Once you are on a contract: monitor your usage as well as your bank account. A provider should give you the tools to monitor your downloads or your cap usage, via a secure page on your provider’s website to which you can log in. If you are not sure how to do this, contact your provider. Check your bank balance for any payments that seem out of the ordinary.

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