Keep an eye on your direct debits

Direct debits are wonderful things. They make it far easier when dealing with, say an energy company, where payments are regular but potentially variable. But I've reasonably discovered a downside, at least if you are involved in a charity or small organisation.

I'm treasurer of a small local charity. The other day I was glancing at the bank accounts online and noticed something odd. Two direct debit payments had been made from our account, both for relatively small amounts. Each had a reference starting DVLA- followed by a car registration number. When I had a look at our regular payments there were in fact three direct debits of this kind, though one hadn't had any money taken yet. This was from an account only used for incoming payments.

We had not set up any direct debits - certainly not with the UK's DVLA, which handles car licensing as there are no vehicles associated with the charity. I rang the bank and, to their credit (or, rather, ours) they had refunded the money with 2 hours. But this should not be able to happen.

Traditionally, direct debits could only be authorised with a mandate that had a signature (in the case of our charity, two signatures), which would be checked at the branch against a signature card. Now, though, this is all handled centrally, and direct debits can be set up online. All you appear to need to set one up is the sort code and account number.

After mentioning it on a group for similar charity officials, several others came back and said they'd experienced the same thing. While the bank was very quick to act they have also said '[DVLA reference] must have your permission to take a direct debit... We've asked them to provide proof they had your permission... if they did we may take back the refund.' Now clearly there's a flaw in that statement. They didn't have our permission but still allowed the payment to go out.

I've now been into the bank and they tell me that with an electronic direct debit, set up by someone like the DVLA, no checks are made by the bank at all. They don't even have a mandate - they just rely on the DVLA to ensure details are correct before taking money. Keep an eye on your direct debits!

Image by Museums Victoria from the 1980s on Unsplash - banks aren't like this anymore...

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