How hard does your bank work to keep your money safe? Not as hard as you might hope.
We sign up to regular automatic payments every day. Most of them are direct debits or standing orders. Some of them, though, are in the form of a ‘continuous payment authority’. This is usually charged against a debit or credit card, not a bank account number, and the arrangement carries some risk.
It gives much more flexibility to the company taking your cash, and much less protection to you. In the majority of cases this causes no problem, but if you fall into the clutches of an unscrupulous organisation you could be in real trouble.
You could have large sums of money repeatedly taken out of your account, and have no way of stopping it. ‘Phone calls to the firm go unanswered. Emails bounce back to you. What can you do to stop this company emptying your account?
Perhaps you could ask your bank to stop making the payments. You’d think so, wouldn’t you? The FCA has told the banks that they must obey their customers’ instructions in this situation. Water off a duck’s back.
Your bank will tell you that it is powerless to prevent money being taken out of your account on dubious authority. It’s up to you to do something about it.
Lets look at the other side of this coin. Imagine: you make a mistake when setting up a funds transfer. You dare to suggest that your bank should have seen that the transaction was grossly out of character for the account; it should have been queried. Your bank will tell you that it has no choice. It must blindly follow your instructions.
This is where we enter the alternative reality of retail banking. A statement can be both true and false at the same time. Your bank must always follow your instructions. Your bank need never follow your instructions. It’s quantum finance.
The situation isn’t completely hopeless. After you’ve jumped through a sufficient number of hoops, you’ll be able to turn to the Financial Ombudsman Service. Your bank will then be told to stop the payments and reimburse you.
The banks must have been told this thousands of times. Why haven’t they learned yet? Why is is necessary to go through this process every time?
I understand why banks routinely stall in this way. It’s normally in their interests to delay the moment when they must repay their customers’ money. In this case, though, the longer they prevaricate, the more they’ll have to pay. It doesn’t make sense.
I have a theory. Ignoring their customers’ best interests has become so ingrained for most banks that they can’t break the habit, even when it hurts their profits.
- How a ‘risk-free’ online order can cost you £180 a month – every month (theguardian.com)
- Payday loan debt victims have no money or food as parasite lenders clean out their bank accounts without warning (dailyrecord.co.uk)