How to deal with unauthorised direct debits on your credit card
Understand what counts as an “unauthorised” direct debit, and what you can do about it if you’re faced with one.
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Direct debits are not fool-proof. Human and system errors can mean that unauthorised direct debits are sometimes processed without your knowledge or consent. These can leave you feeling lost trying to figure out how to reclaim your money and what your rights are.
This guide will address what consists of an unauthorised direct debit, whether unauthorised debits are illegal (and if so, which ones?) and what you can do about it if it happens to you.
What counts as an unauthorised direct debit?
An unauthorised direct debit is a form of unauthorised transaction. It is essentially a direct debit payment that you did not make to a business. Here are some examples of unauthorised direct debits:
- You cancelled an existing direct debit but the money still came out.
- The business in question took more than the amount you agreed to.
- You had a payment taken from a business that you have never used.
- You had a payment taken for a service/product that you never used/bought.
Before you contact your provider
If you don't recognise a transaction on your account, try to consider whether the direct debit in question is definitely unrecognisable. Some business names may show up differently on your bank statement than they do on their websites. Try a quick Google search to see if you recognise the business in question after all.
Another common misconstrued unauthorised direct debit payment can be payments made through PayPal. This is because PayPal often credits sellers, and then takes the payment from your account on a later date via a direct debit payment. This can be confusing and is easy to mistake as unauthorised.
That being said, if you're still uncertain, it's a good idea to contact your biller or credit card provider to see if they can help you.
Why use direct debits?
Many of us set up direct debits. They can be a huge convenience when paying bills, subscriptions and memberships. You can even opt for a direct debit for playing the lottery every week, such as with subscriptions like "Autoplay Melbourne".
Setting up a direct debit significantly reduces your risk of accidentally missing a payment and being charged a penalty fee, having your service shut off or (possibly the worst case scenario) missing the week your numbers come up in the lottery.
I think I've had an unauthorised direct debit, is it illegal?
There are a number of reasons unauthorised direct debits occur, and it's important to understand that not all unauthorised direct debits are due to fraudulent activity. Some may be due to simple human error. This could either be on your part, for example, if you haven't correctly cancelled a direct debit when you thought you had. Or, it could be on the part of the business that billed you.
Other unauthorised payments can be as a result of system errors. Neither human nor system errors are instances that break the law. Only fraudulent activity is illegal. However, just because a crime hasn't been committed, doesn't mean that you can't get your money back.
Steps to deal with an unauthorised direct debit
1. Contact the biller/company
The first thing to do is to talk with the biller. A company that has billed you should be given the opportunity to correct a mistake, if that is the reason for the unauthorised payment. Normally, complaints are resolved at this stage. However, if the unauthorised debit was due to fraudulent activity from the biller, they are uncooperative or they're difficult to contact, there are further steps that you can take.
2. Contact your credit card provider
In the case that the business that billed you does not provide a refund to your account, your next point of call is your credit card provider. If you have not received the goods or services that you have paid for and your biller has not refunded you, your credit card provider may be able to process a refund. This is called a "chargeback" and is a reversal of a credit card transaction. This should include any fees or interest charges that may have been incurred.
Please note that chargebacks are usually only available for credit card transactions and not for debit cards.
Chargebacks usually occur when a cardholder raises a dispute with their credit card issuer in relation to a purchase made using their credit card. If you have experienced an unauthorised direct debit transaction and have records of your contact with your biller and card provider, you can use these records to confirm your case and request a chargeback.
The chargeback will work on your credit card if your biller refuses to refund you after an unauthorised debit was charged. It can also be used if the biller is taking too long to handle your refund.
You may be able to dispute the transaction with your issuer and request a chargeback up to 90 days after it occurred. However, it is strongly recommended you do it as soon as possible, as you may lose some of your rights after the due date of your credit card bill payment.
3. File a complaint with an external resolution scheme
If the above steps do not resolve your issue within 45 days of a complaint being made to your issuer, you can then file a formal complaint with an external resolution scheme.
The relevant scheme is the Australian Financial Complaints Authority (AFCA). You can contact the AFCA:
- By phone. AFCA can be contacted by phone on 1800 931 678.
- Online. Contact AFCA online via afca.org.au.
Ensure that you attach a copy of the letter of complaint that you sent to your credit card provider and copies of any responses that you received. For further information on lodging a formal dispute with your credit card issuer with an external resolution scheme, please refer to this guide.Back to top
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