Direct debits from your bank account are useful for paying regular fixed amounts, such as housing, utilities or other recurring payments. Some financial institutions may charge a fee to process a direct debit.
Cancelling a Direct Debit
The Code of Banking Practice sets out what a bank must do if you want cancel a direct debit from your bank account.
The Code states:
21.1. We [the bank] will take and promptly process your:
- instruction to cancel a direct debit request relevant to a banking service we provide to you; and
- complaint that a direct debit was unauthorised or otherwise irregular.
21.2. We will not direct or suggest that you should first raise any such request or complaint directly with the debit user (but we may suggest that you also contact the debit user).
Cancelling a direct debit is an important safeguard to allow you to control your money and avoid additional fees for overdrawn accounts.
To be safe, put the request to cancel the direct debit in writing. If the bank refuses to cancel the direct debit or does not process it promptly, you can complain. More information about how to do this can be found here.
Confusion may arise because payments may be coming out of your credit or debit card, and not your bank account. If you are unsure, check the authority given to the business or organisation. If you gave the business your BSB and account number, it comes from your bank account.
You can revoke the authority to take a recurring payment from a credit card at any time. The request must be directed to the merchant, not the bank. Put the request to the merchant in writing and send a copy of the request to the bank.
If the merchant refuses to comply and continues the recurring payment from your credit card, you can ask for a chargeback from the bank.
Consequences of Cancelling the Direct Debit
If you stop payments, there could be unintended consequences from the person or organisation that you are paying. You can be sued for an outstanding debt, or goods and services may be stopped. You need to find an alternative way to pay your regular bills, which need to be put in place before you cancel.
If you dispute a debt or have a problem with goods or services, get legal advice as soon as possible.
If you need to cancel a direct debit or recurring payment from a credit card because you are experiencing financial hardship, getting help from a free financial counsellor is a good idea. You can call 1800 007 007 to reach the National Debt Helpline.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.