Use and Abuse of Direct Debits
Tuesday 03 July 2012
The use of direct debits to pay regular bills in France presents both conveniences and certain disadvantages.
Although the torpor of having to pay bills can never be avoided, some psychological relief can be obtained by automating the process through direct debit arrangements.
In France, as elsewhere in the world, it is a practical and easy way to pay utility and other similar bills and avoids the risk of bills going unpaid or delays occurring in settlement because you had forgotten about it.
However, we know from your mails that in the event of disputes or termination of the direct debit the mechanism can prove troublesome for, once created, the initiative of collection resides with creditor.
Practice in France
A 'direct debit' in French is called a 'prélèvement automatique'. It needs to be distinguished from a 'standing order', called a 'virement', which is for a fixed amount for a specific period. By contrast direct debits can vary in amount for each withdrawal.
All utility and service providers in France (banks, phone, electricity, gas, internet etc) offer a direct debit facility to their customers.
Indeed, some are so keen for you to opt for this method of payment that you may even find they seek to impose it as part of the contract.
If you are offered direct debit as the only form of payment then you can politely refuse and ask to pay by other means. In the event of difficulties then you should report the matter to the Commission des clauses abusives.
The imposition of the payment of rent by direct debit is expressly outlawed.
Rather than seek to impose, some service providers penalise those who do not opt for direct debit. Thus, some mobile phone and internet companies ask for a deposit (dépôt de garantie) to be paid if the customer does not opt for direct debit, a practice that is unfortunately not illegal.
In other instances, some service providers have sought to impose extra charges if customers elect other forms of payment, a practice which has been condemned in the French courts. Article L. 112-12 of the Code Monétaire et Financier stipulates that « le bénéficiaire ne peut appliquer de frais pour l'utilisation d'un instrument de paiement donné ».
Contesting a Direct Debit
If, before your account is debited, you do not agree on the amount of a direct debit, you must inform your creditor, preferably by a letter sent recorded delivery and giving an acknowledgement receipt (recommandée avec avis de réception).
At the same time you can also ask your bank to not make the payment, a process called opposition de prélèvement.
Under European regulations the bank cannot make any charge for the temporary suspension of the payment of a direct debit, as it does not bring into question the direct debit authorisation itself, merely the particular withdrawal being disputed.
If the direct debit has already been taken from your bank account it is still possible for you to contest the debit, provided you were not given prior notice of the payment and that the sum debited was greater than you could reasonably have expected. (Article L. 133-25)
Effectively, therefore, the payment can be retrospectively cancelled, provided you can convince your bank it was irregular. You have 8 weeks to make such a request, which you must do so in writing, to which the bank is obliged to respond within 10 days. The bank must give a justification for its decision if it refuses to make the reimbursement.
Cancelling a Direct Debit
If you wish to cancel a direct debit, then you are at complete liberty to do so, by writing to your creditor and informing them. Once again, you need to do so by recorded delivery.
You also need to write to you bank and confirm cancellation. The bank can make a charge for the cancellation of a direct debit, but this will depend on the type of account and contract you hold with them.
Where the bank makes a direct debit that you have not authorised you have 13 months from the date of the withdrawal to contest it. French banks offer a direct debit guarantee, as occurs elsewhere in Europe, where the obligation is on the bank to prove that they acted correctly in making the payment. Direct debit fraud is a problem in France as in most other countries.
Pan-European Direct Debits
Under European regulations applicable from 2009, it is possible to set up a direct debit arrangement in one EU country for payments in another country, on the same basis as is applicable in the home country.
These arrangements apply under what is called the Single Euro Payments Area (SEPA).
However, the system is only available for the payment in euros, so you cannot set up a direct debit in a Sterling account to a euro account in France. You would need to hold a euro account in the UK from which the payment could be made.
European banks have also been slow in setting up the arrangements, so you would need to discuss with your bank.
This article was featured in our Newsletter dated 03/07/2012