How to cancel your gym membership
I have automatic direct debit arrangements with a gym and a charity and can't afford them anymore. How do I cancel them?
In the past, attempts to cancel automatic debit arrangements often turned into a tedious game of ping pong, phoning the bank and then the merchant, which then flicked you back to the bank, without result.
The bank taking the money out of your account said you had to contact the merchant involved - gym, energy supplier or charity - to stop the automatic debit arrangement before it could stop dragging money out of your account.
The merchant, not wanting to lose a customer, often pushed it back on the bank.
The strong desire to hang on to the customer meant the merchant had a battery of tools to drag the process out for as long as possible.
They included not being there when you called, not returning calls and just taking no action. In the interim, another few months of direct debits rolled out of your bank account and be deposited in the merchant's account.
The person on the merchant phone may say: "I don't have the authorisation to do that, and will get my supervisor to call you."
You wait and wait for the call that doesn't eventuate.
Or you are asked to cancel online, but can't find where on the website, or the email goes astray and the cancellation fails to happen. So you go back to the bank. Sound familiar?
The good news is that now under the Code of Banking Practice you no longer need permission from the merchant before contacting your bank to stop an automatic debit. The bank must cancel the direct debit promptly.
There are a couple of exceptions, such as if you have signed a hire purchase contract, when you need to contact the company first as cancelling the direct debit may be a legal breach of the payment agreement you have signed.
And you may need to negotiate another form of payment to replace the direct debit.
What's the best way of going about it?
Trying to cancel a direct debit by telephone isn't the best way.
We all know that call centre operatives have only limited authority, usually restricted to reading the script in front of them, and while they listen and say soothing words, they don't achieve much.
They try to flick you onto someone more senior and you often get lost on the way.
Writing to both the merchant and your bank is the most effective procedure.
To the gym or charity head your letter "Cancellation of direct debit" so that there is no mistake about the purpose of the letter.
State the amount, date and duration of the payment you are cancelling and what it is for. Inform the merchant you are cancelling your authority for them to automatically debit your account from date of writing.
Ask the merchant to confirm in writing that the direct debit has been cancelled. Sign the letter and provide your name, address, phone number and any other customer or account identifying detail.
What should I tell the bank?
Head your letter "Cancellation of direct debit". It should refer to your authority to direct debit to ABC gym or charity, your account reference number and the amount automatically whisked out of your account on the date given of every month.
Tell them you are cancelling this authority effective from date of writing. Ask the bank to confirm in writing that you have forwarded the cancellation letter and that it will abide by your instructions.
Keep copies of both letters in case the debits continue and you need to take them to the Financial Services Ombudsman to sort out unprocessed cancellation instructions.
Are there any exceptions to this process working?
If you have signed a contract stipulating that payments must be made by direct debit, the merchant may try to force you to stick to it. But according to the Consumer Credit Legal Centre of NSW, you can cancel a direct debit whenever you want.
You may still be under an obligation to make further payments, but this does not mean it has to be via direct debit. You can negotiate an alternative payment method.
The downside of direct debits
While convenient, direct debits do have drawbacks. Apart from the effort involved in cancelling them, their principal drawback is that a bill containing an error or overcharge will automatically be paid and you may not know until too late.
No one monitors whether the bill is accurate before payment rolls out of your account, and you may be unaware you have paid too much for the phone or power.
That means unravelling the transaction after payment to sort out the billing error, which is always more difficult than receiving a bill, scanning and checking it and then paying it when it you are satisfied it is correct. A useful source of information is the Fair Trading Office in your state.