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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

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.

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6 Responses

  1. Default Gravatar
    natApril 11, 2017

    American Express just direct debited the entire amount owing on my credit card from my linked savings account. I used to have the D/D amount as the minimum monthly repayment. I gave no express written permission to change this, how can they do this and leave me with no cash? I do not read every single letter they send out to me – in fact I hadn’t used the card for around 3 – 4 years! They are not going to refund me the +$1,500 they took.

    • Avatarfinder Customer Care
      HaroldApril 13, 2017Staff

      Hi Nat,

      Thank for your inquiry.

      Our company finder.com.au is a financial comparison website and general information service designed to help consumers to make a better decision. Please note we do not represent any company we feature on our pages.

      It would be nice if you can coordinate this matter directly with your bank. To settle the issue and ask them what are the available options for you based on your current circumstances.

      Cheers,
      Harold

  2. Default Gravatar
    BernadetteAugust 12, 2016

    Hi I have just found out that a hotel i booked online for a couple of months away have already taken out there full fee of 1600 dollars out of my visa debit card which i only used to hold the booking, My question is how did the bank process this and is this legal as my visa debit savings acc balance was zero dollars at time

    • Avatarfinder Customer Care
      MayAugust 16, 2016Staff

      Hi Bernadette,

      Thank you for your question. Please note that you’ve come through to finder.com.au we are an Australian financial comparison website and general information service. We are not financial experts and so can only offer a generalised advice.

      Just to confirm, have you already checked with the hotel why they have debited the amount from your debit card if you just reserved the booking? It is also possible that there was an overdraft transaction on your debit card when the hotel debited $1,600 from your debit card. It sometimes happens to your debit card when you least expect it. So it’s best that you also have to get in touch with your bank to verify the transaction.

      I hope that could help.

      Cheers,
      May

  3. Default Gravatar
    PeterJanuary 13, 2015

    I made an initial personal credit card payment to a office rental provider on behalf of a company that I own with other shareholders. It was explained that future billings would be made directly from that company . The rental provider has used my credit card details to infrequently make payments to the company’s rental account despite being advised to cease such actions. Is there legislation that I can utilise in these circumstances? I have had to cancel a low interest credit card to prevent future drawings.

    • Avatarfinder Customer Care
      JonathanJanuary 15, 2015Staff

      Hi Peter,

      Thanks for your question,

      In the event of unauthorised transactions on a credit card, the first order of action is to check with the biller/ company that has billed you the money to provide them the opportunity to correct a mistake if it does occur. The next step is to contact the credit card issuer to resolve the issue, this is provided that the biller was not able to get a refund onto the account. The credit card issuer can stop any further unauthorised transactions and will take the necessary action to rectify the issue.

      In terms of getting money back the ASIC Epayments Code sets out the rules for determining who pays for unauthorised transactions. Users of electronic payment facilities in Australia are protected by the ePayments Code. This code regulates consumer electronic payments, including ATM, EFTPOS and credit card transactions, online payments, internet and mobile banking, and BPAY. It also provides a full list (ePayments Code subscribers’ list) of all banks, building societies, credit unions and even some payment services that have signed up to the ePayments code. The ASIC Epayments Code is available on the ASIC Australian Government website, and provides an online form to officially lodge a complaint with ASIC.

      I hope this has helped!

      Cheers,

      Jonathan

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