STOP FIRMS DIPPING INTO YOUR BANK ACCOUNT
In May I advised here that you can cancel payments authorised on a debit or credit card just by telling your bank or card provider.
But four months on – and even longer since the law was clarified by the Financial Services Authority – some banks are still refusing to obey the law. Especially when it comes to payments made to a payday loan company.
These loans work like this. You need £200 urgently. You call up, promise to pay back £262.25 in four weeks’ time, and give the firm your debit card number. Within an hour or so the money is in your bank account. And yes those are real figures. And in case you want to know the APR is 3287%.
Normally the lender will dip into your bank account 28 days later and claim the £262.25. If it’s not there then it will dip in to get what it can and then dip in again and again until, a bit at a time, it has reclaimed all its money.
But what if you decide before that money is taken that the financial problems that led you to take out an expensive short-term loan are getting worse? So you go to a debt charity like National Debtline and it tells you to prioritise you debts and repay the ones that are essential – like your rent – and cancel the others so it can negotiate with your creditors to repay what you can afford when you can afford it. Of course, you still owe the firm £262.25. But this way you get to negotiate when and how much is paid back.
So you call your bank to cancel the repayment to the payday loan company.
The law says your bank must cancel that payment. And if it lets it through it has to reimburse you. But I have had so many complaints from people saying their bank had refused to cancel it, that I decided to check the law.
I also got a solicitor who specialises in consumer rights to do the same; I asked a debt charity for its interpretation of the law; and I went to the regulator the Financial Services Authority to make sure the three of us had not got things wrong. I even asked a payday loan trade body.
Phew! Everyone confirmed that your bank has to stop the payment. It’s the law. As long as you tell it to do so by close of business the day before the payment is due to be taken.
But some banks are still not convinced. RBS/NatWest says the law does not apply to payday loan repayments. And some other well known High Street names are certainly telling customers that – though they have changed their tune when I have challenged them.
You can read more, get all the legal and technical references you may need, and hear the lawyer’s unequivocal view via my blogpost here http://goo.gl/1f8SN
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