Sunday, July 25, 2010

Direct Debit – French Style

Here in France, we have a very common method for paying recurrent bills, called "Prélèvement Automatique".

It is similar to other Direct Debit arrangements, in that you sign a couple of forms which then allow supposedly reputable organisations to dig freely into your bank account for whatever amounts they like.
I have used it for years to pay all our bills for Income Tax, Property Tax, Land Tax, Dust-bin Tax, Electricity, Water, Car Insurance, Health Insurance & even, against my better judgement, Internet/Telephone Services.
It has always worked perfectly – the correct amounts being debited at the right moment in every case.

But I have been aware, from forums & consumer magazines & newspaper correspondents, that a very large number of people have considerable difficulties, especially with Internet & Telephone Service Providers.
The problem is that once you have signed papers for a Prélèvement Automatique, you can't switch it off!

I will repeat that, in case it is not clear: You sign a paper to allow somebody to dig unlimited amounts out of your bank account, then you cannot stop it.

If you find yourself in conflict with (typically) an I.S.P. then the proper way of stopping them helping themselves to your cash, is to send them a registered letter asking them to please stop!
Imagine their reaction…

When I switched Health Insurance recently, I noticed the old company made a debit after the end of their time (I later found it was legitimate) so I asked the bank how to turn that P.A. off.
I have Internet Banking & can do almost anything on-line, including keeping track of P.A's, so I expected to be able to control my P.A's from that site too.
The bank replied that it was impossible for them to turn off a P.A.
The only possibility was a temporary opposition at €20.
I know this is true, but still find it hard to believe!

Looking at how things work elsewhere, I found encouraging information on UK & Australian Ombudsman sites:
"Customers can cancel a direct debit at any time by writing to their bank or building society."

I particularly like the clear commitment in the Australian Code of Banking Practice:
"19 Direct debits
19.1 We will take and promptly process your:
(a) instruction to cancel a direct debit request relevant to a banking service we provide to you; and
(b) complaint that a direct debit was unauthorised or otherwise irregular,
and will not direct or suggest that you should first raise any such request or complaint directly with the debit user (but we may suggest that you also contact the debit user)."
So I was beginning to think I could start to agitate with French & European banking/political authorities to drag France into line with "civilized" countries.

Then I discovered SEPA.
Cutting a long story short, SEPA is introducing common payment systems to 32 countries, including Euro Zone & UK & Switzerland.
Sounds good.
A lot of it is working well already.
Just the new Direct Debit part is running late.

And as far as I can see, that part is based on the French system, not the UK system.

In all my digging, I see no mention of the paying customer being able to just tell his bank to switch off the payments.
Supposedly, you can always get a "no questions asked" refund from your bank, at least for a couple of months after any suspect payment.

If I designed a potentially damaging machine without an on/off switch, I would expect to be severely reprimanded & prevented from doing it again.
Do financial organisations not work like that?
I hope I have simply misunderstood the information I read, but I don't think so.

Parting thot: "Bank failures are caused by depositors who don't deposit enough money to cover losses due to mismanagement." – Dan Quayle

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