From:  TimB 
Newsgroups: uk.finance uk.legal
Subject: Re: The Direct Debit Guarantee (DDG)
Date: Sun, 03 Jun 2007 13:47:56 -0000
   posting-account=xmEmLA0AAABciHC4l4hrF6OeGdxC9gjC

On Jun 3, 1:53 pm, Johannes Andersen  wrote:
> TimB wrote:
>
> > On 3 Jun, 12:17, johannes  wrote:
>
> > > It was quite an odd case indeed, since the stockbroker used the DD me=
chanism
> > > to take the money. Seems financial-ombudsman favoured the bank.
>
> > I see it now...yes, very strange, since DD is the only method I'm
> > aware of to allow a third party to access a bank account directly,
> > unless the stockbroker also had the customers debit card details. Even
> > so, the fact the DD *was* used should make the transaction subject to
> > the DD guarantee. If the broker is authorised to access the account
> > using other means, then he should use them.
>
> > Strange indeed..
>
> Here is the full story:
> -------->
> " 27/2
>  bank pays out after direct debit cancelled - direct debit guarantee not =
applicable
>
>  Mr F set up a variable direct debit for payments to his stockbroker. He =
generally
>  placed an order for shares around the middle of each month and the stock=
broker
>  collected the payment through the direct debit at the end of the month.
>
>  Eventually he decided to end this arrangement and cancelled the direct d=
ebit mandate.
>  But the very next day, the stockbroker requested =A350,000 via the direc=
t debit and the
>  bank paid. Several months after this, Mr F complained to the bank and cl=
aimed a
>  refund of the money under the direct debit guarantee.
>
>  The bank refused, saying that to repay Mr F would result in his 'unjust =
enrichment'.
>  This was because he already had the shares to which the payment related,=
 even though
>  their value had since gone down.
>
>  complaint rejected
>  In assessing this case, we looked at the terms of the direct debit guara=
ntee.
>  Customers can cancel a direct debit at any time by writing to their bank=
. Mr F had
>  written to his bank and cancelled the direct debit the day before the pa=
yment was
>  made.
>
>  So if the bank had paid the stockbroker under the direct debit, it must =
have been in
>  error because he had cancelled the direct debit. And if the bank makes a=
 payment in
>  error the customer is entitled to a full and immediate refund.
>
>  But in this case we found that the stockbroker had Mr F's authority to d=
ebit his
>  account independently of the direct debit. It was in the terms and condi=
tions of his
>  contract with the stockbroker that the costs of each deal would be taken=
 from his
>  nominated account. So that gave the bank authority to release money from=
 his account
>  to the stockbroker, whether or not this was done via a direct debit, and=
 we did not
>  uphold the complaint."
> -----------<
>
> Seems the sticking point was the small print in the contract with the sto=
ckbroker.
> Hence it is vital to get the exact DD contract in writing and check out a=
ll the small
> print and possible additions over and above the DDG. But few companies pr=
ovide these
> details.

Normally though, the FO wouldn't get involved in contractual
arrangements between two parties - it's only interest is the
arrangement between the complainant and, in this case, the bank.
Contractual disputes are for the courts to sort out. I can only assume
they got involved in this case because the stockbroker also fell under
the remit of the FO.