Hi Folks
I am wondering if anyone could share any thoughts on any legislation to seek guidance on direct debit processing,missed payments,reasonable charges allowed?
Thanks in advance.
Replies (7)
Please login or register to join the discussion.
I always thought ...
... that direct debits were a payment system set up by the banks for the convenience of their customers and as such, would not be the subject of specific legislation, but of any general legislation on making payments.
I think you will need to explain what your concern is with missed payments and what you mean by reasonable charges in order for anyone to be able to answer your question properly.
Actually a commercial debt?
The normal practice is that direct debit/standing order payments are paid from the start of the year to spread the cost of an invoice to be raised when the accounts/tax work is done. Until you've raised that invoice, a missed payment isn't a late payment of a commercial debt, so won't be covered under the legislation you are referring to.
Dependent on your engagement terms, you might have breach of contract, but that almost certainly isn't worth pursuing for a single missing DD. From a commercial point of view, raising excessive charges on a single missing payment for work you haven't done yet might put clients off using you at all.
Unwise contract
As an aside, I cannot help noting that you have halved the charge for a missing direct debit payment. (you previously had it as £10 plus 8.5% interest on top). Does this mean you too considered £10 a time plus interest excessive? So,who decides whether a £5 charge for a missed DD payment is excessive or not? Assumption- late payment charges are mentioned in the engagement letter & signed by the client.
I'm not saying you cannot have a clause in the engagement letter that allows you to make a charge. I'm just saying that, unless you are doing significant work as you go along, a charge for a single missing direct debit is commercially unwise. It will be seen by clients as you seeking to rake money in where you can, even when you haven't done any work, and that will lead many to seek pastures new. The statutory penalties for late filing are considered a cynical money-making scheme by many, so doing something comparable isn't going to go down well.
Consider this alternative. You will only file when payments to date are sufficient to cover your bill. This gives the client an incentive to keep payments up without trying to stiff them for more. As you are only seeking payment for what you have done, clients can hardly say you are being unreasonable (or you don't want the ones who would)
There is also the possibility that, should someone wish to make a point and make it a legal matter, it would be judged an unfair contract term. The onus would then be on you to prove that you could justify the amount you were charging for additional admin. So the answer to the question of who decides whether a charge is excessive is the courts.
No, Stepurhan wasn't saying that
He was proposing the system that we use, ie. we do not make any submissions unless, and until, fees are paid in full, be that by monthly direct debit or lump sum.
So if a client had missed some d/d payments, you would expect them to pay the balance before you submit the tax returns or accounts.