DRN-4580359
The complaint
Miss G complains that Lloyds Bank PLC (“Lloyds”) rejected a direct debit (“DD”) indemnity
claim she submitted going against the direct debit guarantee.
What happened
In February 2018 a direct debit authority for a merchant (the “originator”) was granted to take
a monthly DD from Miss G’s bank account with Lloyds. Varying amounts have been taken
from Miss G’s account by the originator since which Miss G says she didn’t agree to.
Miss G submitted an indemnity claim to Lloyds regarding this DD authority for the period its
been active. Lloyds rejected the claim and advised Miss G to contact the originator. Miss G
complained, she says she is entitled to a refund under the direct debit guarantee.
Lloyds says it checked the details of the direct debit authority which looked correct and paid
for a service that Miss G received and so no error had been found. Lloyds explained that a
DD guarantee doesn’t always mean a customer will get their money back as they have to
meet the criteria and in this instance Miss G didn’t and so the claim was rejected.
Furthermore, Lloyds felt if Miss G hadn’t authorised the DD then it would’ve expected her to
contact it sooner than she did. Lloyds also notes that on numerous occasions it sent out
letters to her when the direct debit had been returned which would’ve brought to her
attention the existence of it.
Miss G was dissatisfied with this and brought her complaint to this service. She says Lloyds
have not complied with the direct debit guarantee and that she received a partial refund in
May 2023 and so she can’t see why she wouldn’t be entitled to a refund of all the payments.
Miss G says she suffered with mental health issues and she never noticed the payments
prior to this and never agreed to the direct debit.
One of our investigators looked into her concerns but didn’t think Lloyds had treated her
unfairly. Given the time that had passed since the DD had been in place, they thought it
reasonable for Lloyds to request further information surrounding the DD indemnity to ensure
the claim was legitimate before processing it and as no error had been found to occur a
refund wasn’t due.
They also explained that as the direct debit guarantee doesn’t deal with contractual disputes
between the consumer and the originator and it isn’t the responsibility of Lloyds to rectify any
dispute between the two parties. If Miss G wasn’t aware of the variation in the amount and
dates of the DD’s, than she would need to raise this with the originator.
Miss G disagreed. She says as the wording of the direct debit guarantee says immediate
refund and as such that is what she was entitled to and has asked for an ombudsman’s
decision.
What I’ve decided – and why
I’ve considered all the available evidence and arguments to decide what’s fair and
reasonable in the circumstances of this complaint.
Having considered everything provided, I’ve decided not to uphold Miss G’s complaint.
My role is to look at the problems Miss G has experienced and see if Lloyds has done
anything wrong or treated her unfairly. If it has, I would seek – if possible - to put Miss G
back in the position she would’ve been in if the mistakes hadn’t happened. And I may award
compensation that I think is fair and reasonable.
As outlined above Miss G is unhappy that Lloyds refused to process a refund of all DD
payments made since 2018 under the direct debit guarantee.
It might be helpful here to explain that the direct debit guarantee entitles account holders to
receive an immediate refund from their bank in certain circumstances such as when the
payment taken is on the incorrect date or the wrong amount is collected. And it cannot be
used to address contractual disputes between the customer and the billing merchant.
The purpose of this guarantee is to protect customers who’ve allowed third-party permission
to take payments directly from their account. If a payment error is made – either by the bank
or by the business collecting the payment (“the originator”) – then they should be able to get
an immediate refund from the bank. And the bank will get repaid by the originator under the
direct debit indemnity.
So the question I have to ask is whether Lloyds has done anything wrong or treated Miss G
unfairly by not submitting a direct debit indemnity claim when Miss G asked it to.
And I don’t think Lloyds did treat Miss G unfairly - as it wasn’t able to establish from the
information it had whether there had been a payment error. Indeed, the DD authority was set
up for a service Miss G was receiving and had been paid for regularly for a number of years
without Miss G querying it. So I don’t think it was unreasonable or unfair of Lloyds to seek
further information to ensure the scheme was being used for its intended purpose or for
declining to process the DD indemnity on the basis that it didn’t think the eligibility criteria
had been met.
Miss G says she received a partial refund and so can’t see why she isn’t entitled to a refund
of the lot. But the refund she received came from the merchant and was not actioned
through a direct debit indemnity claim. Miss G says that she never authorised the DD and
wasn’t aware of the payments prior to raising her complaint. I appreciate it has been some
time since the DD was set up and so Miss G might not remember authorising the instruction.
But from the information I’ve seen I’m satisfied that the payment relates to a service Miss G
receives and that no error has been made.
Furthermore, as has already been explained the DD guarantee can’t be used to address
disputes between the customer and the originator and as such if Miss G is disputing the
amount or frequency of the DD, she needs to raise this with the merchant.
So overall, I don’t think Lloyds has made an error or treated Miss G unfairly by not agreeing
to process the DDI based on the information it had and so it follows that I do not uphold Miss
G’s complaint.
My final decision
For the reasons I’ve explained I’ve decided not to uphold Miss G’s complaint against Lloyds
Bank PLC.
Under the rules of the Financial Ombudsman Service, I’m required to ask Miss G to accept
or reject my decision before 14 March 2024.
Caroline Davies
Ombudsman
