Patrick Wright* explains what people can do about forgotten recurring direct debits or unauthorised transactions.
Earlier this year, Erin Hannah Hill’s husband Simon found a strange transaction in her bank account when they were reviewing her finances.
They was a direct debit, with a generic name, charging Erin $33 each fortnight.
The money had been coming out for years, but they had no clue where it was going.
Erin asked her bank to stop the payment, which led to an email from the direct debit provider.
As it turned out, Erin had been unknowingly paying for a gym membership she thought she’d cancelled more than three years ago.
“I gave the [gym access] card back, and I remember having to undo my key ring. I thought it was the end. I never questioned it again,” the 32-year-old from Perth says.
But instead of cancelling Erin’s membership, the gym simply suspended it for two months.
Since then, Erin estimates the direct debit has cost her more than $2,500.
“My stomach just sunk. Gyms have been closed because of COVID as well, so I was thinking how did they have the right to keep taking money out?” Erin says.
“I couldn’t understand how it happened. I felt really sick and I felt stupid.”
Why we need to be careful of recurring payments
With so many services being sold by subscription these days, it’s easier than ever to end up paying for something you’re not using, according to financial educator Lacey Filipich.
“How easy is it to whip out your card and type those numbers in?
“You don’t even notice that [the money] is going, and if you don’t check those statements it can go for a long time,” Ms Filipich told ABC Radio Perth.
Recurring payments can really add up so it’s important to regularly check your accounts to see where your money is going.
If you want to get into the nitty-gritty, you can download a spreadsheet file of your account activity from your bank’s online service, Ms Filipich says.
But even just having a scroll through your transactions regularly can help you spot forgotten debits and transactions.
“I think that story of Erin’s, something’s gone wrong there,” Ms Filipich says
“She’s cancelled the membership, and they haven’t cancelled the direct debit, but it does depend on the terms and conditions.
“Sometimes you do have to do that follow-up.”
One easy way to check up on your finances is to ask your bank to provide you with a list of direct debits and recurring transactions.
Some banks even make this information available in their online banking and phone apps.
How to stop a direct debit
The best way to stop an unwanted direct debit is contact your bank. ASIC’s MoneySmart recommends putting the request in writing for record keeping.
If you know the business that’s charging you, it’s a good idea to notify them as well.
The Financial Rights Legal Centre has forms you can use to generate letters to send to both merchants and your bank.
Some services may have terms and conditions requiring payment via direct debit and if you still owe money you may need to negotiate an alternative payment method.
Why convenience can come with a cost
Sometimes direct debits or subscriptions are unavoidable, but when there’s a choice, it’s worth considering whether the convenience is worth it.
“The systems are designed so that when you part with your money, it’s easy for [the debit] to keep coming,” Ms Filipich says.
“That’s why so many things are subscriptions now, not one-off payments.”
Often you may be able to pay bills via BPAY or bank transfer, rather than having them come automatically out of your account.
It means you’ll know exactly how much you’re paying because you’re transferring it yourself.
It’s one of the lessons Erin is taking away from her experience.
“Besides looking at statements, it’s made me less willing to subscribe now,” she says.
“I don’t want to get stuck into contracts anymore. There’s too much small print, and everyone’s always trying to screw you over.”
Getting help for direct debits and unauthorised charges
Erin and Simon are hoping to get their money back but they’re still negotiating with the gym owner.
If you find yourself in a similar situation, a good first point of contact is the consumer protection agency in your state or territory or the ACCC.
These agencies can help you work out the next steps or refer you to other services that can help resolve the dispute.
If you need some advice about cancelling a direct debit, you can contact a community legal centre in your state or territory or the National Debt Helpline, which provides free and confidential financial counselling.
*Patrick Wright is a contributor with ABC Everday.
This article first appeared at abc.net.au.
