The Direct Debit Indemnity scheme that offers customers the opportunity to reclaim payments taken without their authority unquestionably, offers a fair and efficient process to rectify incorrect transactions. However, the efficiency with which the system operates also presents an opportunity for fraudulent activity.
The scheme allows customers to recover unauthorised payments without having to provide proof that the payment was, in fact, unauthorised. There are no limits on the amount that can be recovered without substantiation, nor on how far back such payments can be claimed.
Claims are therefore being made for banks to repay customers automatically, regardless of the amount, evidence or time scales involved.
An area of potential concern for lenders should be where a customer seeks repayment under a secured finance agreement after the agreement has been settled and property has passed to the customer. In such circumstances the lender’s only avenue of recourse would be to seek to recover the funds through the courts.
Any change to the scheme would require alterations to existing legislation, however, this would be a disproportionate action given the current small scale of the problem. If you are concerned about this issue then the best protection comes from a thorough underwriting process.
Abuse of the scheme is more likely to come from organised criminals than genuine customers choosing to exploit sole transactions, and your underwriting should flush such elements out.
As published in Leasing World – October 2013This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.