Case study – how to cancel a direct debit

Tim entered into a loan agreement with a finance company, whereby repayments were to be made by direct debit. He was on time with his payments until the company changed the day of withdrawal, resulting in his incurring a late penalty fee.

Tim rang the finance company to confirm the day of his direct debit, and was informed that the day change was a mistake. The mistake, however, was never rectified, and Tim incurred another late fee at his next payment, and also a fee from his bank for dishonouring the payment. Despite repeated attempts to clarify his direct debit timeline with the finance company, the problem did not resolve and Tim continued to receive default notices for successive ‘late’ payments.

Using the sample letters on the MoneyHelp website as a guide, Tim wrote to his bank and advised it that he no longer authorised the finance company to direct debit his account and therefore the direct debits were to be cancelled.  He contacted the finance company and informed it of his cancellation and arranged an alternative means of paying the loan.  He also demanded that it compensate him for the dishonour fees he incurred from his bank and the late fees.  In the event that the finance company refused to compensate him, he knew that he could lodge an application with the relevant external dispute resolution scheme.