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Cancelling a direct debit on a statement account

JUNE 30, 2013 BANKING FS, FACT SHEET

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Key Message:
You can cancel a direct debit from your bank account (not a credit card);

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What is a direct debit?

Scams

A direct debit is an automatic payment transferred from your bank account (not a credit card) to
pay a bill or debt.

Buying goods and services

When you set up your direct debit, you would have signed a Direct Debit Request authority with
the business or company (trader) that you agreed to pay money to.

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Can I cancel a direct debit?

Yes. You can cancel a direct debit on a statement account (sometimes called a transaction or
saving account) at any time, for whatever reason, by contacting your bank or the trader.
Different rules apply for credit cards.
Most banks are bound by the Code of Banking Practice which states that a Bank will take and
promptly process your instruction to cancel a direct debit request relevant to a banking service
we provide to you. Credit unions and mutual building societies have similar obligations under
the Mutual Code of Banking Practice. The Australian Payments Clearing Associations direct debit
system rules also places obligations on financial institutions in relation to processing and
cancelling a direct debit.
The terms and conditions which apply to your banking service will also set out your banks
obligations in relation to cancelling a direct debit.

Does cancelling a direct debit have consequences?

Cancelling a direct debit may have consequences. Some contracts require payment by direct
debit, meaning that if you cancel the direct debt you may breach the contract or be required to
pay more. Stopping payments under a contract without lawful grounds may result in a debt
being owed to the trader. You should seek legal advice from Consumer Actions public advice
line if you are unsure about the consequences of cancelling a direct debit or stopping payment
of a debt.

How do I cancel a direct debit?

Step 1: Tell your bank that you want to cancel the direct debit. You could do this by telephone,
internet, in writing or in a branch. Below is a sample letter to send to the bank.
Step 2: Tell the trader that the direct debit has been cancelled.

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Step 3: Check with your bank a few days later and check your statements to make sure the direct
debit has been cancelled.
Some banks might put restrictions on how they want you to give an instruction to cancel a direct
debit (e.g. by filling out a special form in a branch). If the bank is making it too hard for you,
seek advice about whether it is breaching its obligations.

Sample letter cancelling a direct debit

If youd like to see a sample letter to a bank cancelling a direct debit arrangement click: Sample
letter cancelling direct debit.

What if the bank tells me that it cant cancel a direct debit?

The bank cannot lawfully refuse your request for cancellation on a statement account
(sometimes called a savings or transaction account).
If a bank worker refuses to cancel a direct debit, tell them that, under clause 21.1 of the Code of
Banking Practice, a bank must promptly process your instruction to cancel a direct debit request
relevant to a banking service we provide to you.
Dont be surprised if you have to do this. A 2012 study indicated that only a third of consumers
were receiving fully correct information from bank staff when they asked to cancel their direct
debit (Code Compliance Monitoring Committee, Direct Debits Inquiry Follow Up Report, 2012).
If your bank or financial institution fails to cancel the direct debit according to your instructions,
or money is taken from your account, you can attempt to claim this amount back.
If you experience any problems you can:
1. make a complaint to your banks Internal Dispute Resolution team;
2. if your dispute is not resolved, make a complaint to the Financial Ombudsman Service or
Credit and Investments Ombudsman;
3. seek advice from Consumer Actions public advice line.

Further information
Consumer Action Law Centre
Telephone: (03) 9629 6300,
or 1800 466 477.
Email: advice@consumeraction.org.au
If you are deaf or have a hearing or speech impairment, you can call through the National Relay
Service (NRS):
TTY users can phone 133677 then ask for 1800 466 477
Speak & Listen (speech-to-speech) users can phone 1300 555 727 then ask for 1800 466 477
Internet relay users can connect to NRS on www.relayservice.com.au then ask for 1800 466
477
Financial Ombudsman Service
Tel: 1300 78 08 08
http://fos.org.au/centric/home_page.jsp
Credit and Investments Ombudsman
Tel: 1800 138 422
www.cosl.com.au
Moneyhelp
Telephone: 1800 007 007
www.moneyhelp.org.au
Australian Payments Clearing Association
http://www.apca.com.au/
Warning: This fact sheet is intended as a guide to the law and should not be used as a substitute for legal
advice. This information applies only in Victoria and reflects the law as at 3 November 2014.

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