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What is a principal debit?

What happens with my Direct Debit now I have paid off loan in full?

  • Hi, I had a loan with a company and they took a set amount each month by direct debit from my bank account. I have just called the loan company to check how much more I had to pay on the loan and they told me the account was paid off in full last month. I asked them if it was OK for me to cancel my direct debit with my bank and they said yes. I want to cancel the direct debit but I thought I still had one last payment to make. If I was to leave my direct debit set up would they continue to pay each month until I cancel or after my loan is paid in full do they automatically stop taking it? The loan cmpany has terrible cust service and I am worried that if I cancel the Direct debit and I still owe 1 last payment that I will be charged. So I am going to leave it set up for 1 more month to be sure. After this period will they keep taking the money even though the account is paid in full until I cancel the direct debit with my bank??? Hope that makes sense. Thanks.

  • Answer:

    A Direct Debit payment is made when the receiver requests money from the bank. If the loan is paid off then there should be no request, so no payment. But mistakes happen and a payment might be requested even if you do not, in fact, owe any more money. DDs are covered by a guarantee, so if the payment is taken wrongly you can complain to the bank who must return it within 48 hours. It is then up to the bank to get the money back from the receiver. But I'm confused about 1 thing. If a payment is taken how will you know whether it is a genuine payment, or an extra payment taken in error? They have told you that the loan is paid off and you can cancel the DD. So why don't you believe them? Your original documentation should detail exactly when the repayments were due and when the last one would be, so if you're not sure check there. Also, the final payment often is slightly different from the others because it has a final admin charge or has a few extra pence that couldn't be evenly divided across each month. But if the lender has told you the loan is paid off then you should trust them. Either way, you are legally entitled to get confirmation of the amount outstanding in writing, so do this and cancel the DD accordingly.

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If they have terrible customer services I would have thought that is the best reason in the world to cancel the direct debit at your bank. You can call the bank now and ask them to cancel it on a certain date and after that no further funds can be withdrawn from your account by them.

The direct debit payment should only be taken if the company needs to be paid. If no more payments are due they shouldn't take any money. You are covered by the Direct Debit Guarantee. The Guarantee is offered by all banks and building societies that accept instructions to pay Direct Debits. "If there are any change to the amount, date or frequency of your Direct Debit the organisation will notify you (normally 10 working days) in advance of your account being debited or as otherwise agreed. If you request the organisation to collect a payment, confirmation of the amount and date will be given to you at the time of the request If an error is made in the payment of your Direct Debit, by the organisation or your bank or building society, you are entitled to a full and immediate refund of the amount paid from your bank or building society If you receive a refund you are not entitled to, you must pay it back when the organisation asks you to You can cancel a Direct Debit at any time by simply contacting your bank or building society. Written confirmation may be required. Please also notify the organisation." See: http://www.bacs.co.uk/Bacs/Consumers/DirectDebit/HelpCentre/Pages/DirectDebitGuarantee.aspx And: http://www.bacs.co.uk/Bacs/Consumers/DirectDebit/HelpCentre/Pages/default.aspx

Get the name of the person that told you that you can cancel your direct debit, and then cancel it. If your bank overpays the loan company you should be able to get that payment back.

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