Planhacker: Be Careful With Direct Debit Payments

Paying your bills via direct debit has many advantages: it’s automatic, there’s usually no fees involved, and it saves you dealing with paper documents. However, a rise in complaints about how phone companies and ISPs handle direct debit payments shows that a little caution remains wise.

Picture by B Rosen

Earlier this week, the Telecommunications Industry Ombudsman (TIO), which acts as an independent regulator when consumers can’t resolve issues with their telephone or internet service provider, issued its quarterly complaints statistics, covering the first three months of 2011. The figures made for slightly depressing reading, with complaints rising 31% compared to the previous quarter, up to 59,532.

Unsurprisingly, a major reason for that rise is dissatisfaction with Vodafone’s poor network performance. The number of complaints about Vodafone was 14,670, which was up 96% on the preceding period.

However, a perhaps less-expected trend was an increase in the number of complaints about how direct debit payments are handled. 1,092 of the complaints lodged during the first quarter related to direct debit issues, with consumers concerned that they were being overcharged, charged for cancelled accounts or otherwise ripped off. Here’s the statistics on the issue:

Most providers encourage automatic payments, and many impose an additional fee if you use a non-bank option. With the increasing popularity of cap-based plans for phones and shaping options for net access, those payments will often be identical each month. However, if your plan does include excess usage fees, the amount could vary — and that’s where things can get hairy.

One common problem is that additional charges are automatically deducted without prior warning being given, which can cause problems if you don’t have sufficient funds in the debited account (or available credit on the credit card). According to the regulator, this is a big fat no-no:

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.

Other problems identified by the TIO include companies which keep charging a direct debit after an account has been cancelled, failing to charge the fee on the agreed date, and emailing bills after the debit has been imposed All of those generally point to sloppy processes at the telco or ISP, and that impression is often heightened by, as the TIO delicately puts it, “what consumers see as poor customer service” (otherwise known as long wait times, hopeless voice recognition systems and being forced to explain your situation afresh each time you get transferred to the “correct department”).

None of that means you should abandon direct debit; it remains the easiest way to ensure bills are paid in a timely fashion. However, it reinforces the importance of regularly checking bank statements to ensure that you’re not being charged more than you should. If a problem occurs, take it up promptly with your provider; if they don’t resolve it equally promptly, don’t be shy about referring it to the TIO.

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