UK DD clawbacks and Simon Goldberg

[littleFred]

Greetings, fellow admirers of Fotls, SovCit and other crazies lunatics heroes.

I hail from the UK, and confess I may have played a small part in John Harris's decision to close the very entertaining TPUC forum. No names no pack-drill, so I won't say who I was over there. I do regret its passing, but the real nutters die-hards long ago moved to GOODF.

I would like to draw your attention to an impending car crash. It's like a cheap TV movie where we can spot the imminent disaster well before the dumb characters. We scream, "Don't go there! Don't do that!" But we know they will anyway.

The freeloaders I mean frugal folk at GOODF have identified an interesting aspect of Direct Debit in the UK. If the bank or the organisation claiming a Direct Debt from a consumer makes a mistake, the bank promises to refund the money. In the UK, the consumer doesn't need to prove the error. See http://www.directdebit.co.uk/directdebi ... antee.aspx and http://en.wikipedia.org/wiki/Direct_debit . A mere assertion seems sufficient. So what prevents a consumer claiming that all bills he has paid by DD have been in error, so please give me my money back, now? Nothing, it seems. Of course, if the bills turn out to be genuine, the consumer now owes the reclaimed money, but a court case might be required, then bailiffs, and all that hassle. But that's no real problem: the rabbit-holers at GOOF have infallible schemes against such actions, involving three letters and not having a name.

("GOOF" was a typo for "GOODF" but I prefer the typo so I'll stick with it.)

Big successes are claimed, such as murphy74 who says he got £26,000 of his mortgage back. Sure, in their deserved enthusiasm, GOOFers have been known to exagerate just a teensy-weensy bit, but I suspect that at least some banks have paid out some amounts. Perhaps only after ensuring they will get the money from the organisation's bank, so it becomes Someone Else's Bad Debt.

Some folk, such as chrisguy2010, sadly report less success in clawing back mere phone bills.

This method appears to stem from a 23 November 2013 video by the Spaniard, aka WhiteRabbitTrust, aka Simon Goldberg. "For entertainment and educational purposes only."

He relates two anecdotes: one little bunny (translation for sheeple: "one person") used DD clawback as leverage in a dispute, while another borrowed money to purchase a car, then paid the loan back through DD, then decided he had never been lent real money in the first place so clawed back the DD. Yes, he then had trouble from the lender, but some GOOFy letters sent them packing. The Spaniard is careful not to explicitly condone such actions. He has Manardian caution rather than Cliffordian recklessness.

That said, Simon is a reformed debt collector, bank manager, mortgage advisor and so forth who now bravely fights our corner. On 12 April 2013 he attempted to start a criminal prosecution against a load of banks and 89 of their staff, alleging fraud etc. Our plucky hero relates how the magistrate sadly declined to allow the prosecution. In the previous year, he had tried to duck out of paying the interest on an interest-only mortgage. (Reference: http://www.getoutofdebtfree.org/forum/v ... hp?t=46125 )

Anyhow, back to the main story. The clawback idea gained momentum over the summer, in two threads now totalling 480 posts:
http://www.getoutofdebtfree.org/forum/v ... 55&start=0 and http://www.getoutofdebtfree.org/forum/v ... 95&start=0 . Nataliedeakin says she got £3700 back for a phone bill.

Doubtless all these clawbacks stem from genuine errors by banks or organisations. But I fear a time may come when some spoilsport decides that maybe the GOOFers are claiming back money simply because they can, even though they did owe the money. Then there might be, not merely civil debt proceedings, but criminal. Perhaps an example will be made to discourage the others. Who knows? I'll get the popcorn.

PS. Sorry for the YouTube references. I've watched them so you don't have to. And remember, if it's on YouTube, it must be true! (Unless it is merely for entertainment and educational purposes.)

[JamesVincent]

A company I worked for years ago installing pool tables and other game equipment would not accept credit cards for service work, only cash or check. The reason? Chargebacks. He had a customer who, after we were done and left, called her credit card company and said she was not happy with the work and refused the payment of $863 in labor. The reason she was "dissatisfied"? She claimed the table was one foot too far over from where she wanted it, even though she was there and agreed where we put it was best. Credit card allowed it and refused payment to the company. So the 4 hours we spent installing the table, couple of hours in driving to break it down and pack it in the truck, drive it to her house, unpack it and install it in her house, all for zip. Oh, he could have fought it, and spent more in legal fees and time then the charge was worth, even if he went after legal fees as part of a settlement. So.... he stopped taking credit cards.

While this is one example I know of several others that have happened to others in a service industry. Reminds me of the sort of thing that you are talking about and it's a dirty, disgusting trick.

[Fmotlgroupie]

Welcome to Quatloos! Thanks for a great first post. I find this really interesting - a whole new (transparently fraudulent) approach for Freeman types to use in welching on their debts! I'm sure (sadly) we'll still be talking about it in five years. And about the idiots who have gotten convicted for it.

[grixit]

http://www.getoutofdebtfree.org/forum/v ... 95&start=0 . Nataliedeakin says she got £3700 back for a phone bill.

That seems dubious. She'd have to be phoning one of the Mars rovers to run up a bill like that.

[ArthurWankspittle]

http://www.getoutofdebtfree.org/forum/v ... 95&start=0 . Nataliedeakin says she got £3700 back for a phone bill.

That seems dubious. She'd have to be phoning one of the Mars rovers to run up a bill like that.

Don't know, might be a mobile phone bill or a phone and internet package deal, both of which would be significantly bigger than a landline phone bill. But it will still represent a lot of calls and a long period of time. On explanation could be claimed fraudulent use of the mobile phone though - massive use including international calls can clock up debt at a pace in the uk.

[littleFred]

It would take me ten years to run up a £3700 phone bill. Perhaps she claimed back multiple years. Or perhaps the phone company really did screw up and overcharged. I don't know.

I've discovered an article from 2010 that discusses clawback fraud and the mechanisms of the Direct Debit Guarantee. The DDG seems almost designed to encourage the fraud.

[Hercule Parrot]

Hi shipmates -

I am also a UK member (long-time reader, first-time poster etc). I've followed the FMOTL story primarily from a criminal justice aspect, but everyone is aware of the lunatic GOODF site. I would be very surprised if this scam works as they claim it does (but that applies to everything on GOODF generally...). The DD Guarantee only says :

"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"
http://www.directdebit.co.uk/DirectDebi ... antee.aspx

I would be surprised if I could write to my bank tomorrow and immediately recover 6yrs of mortgage payments on the basis of my own assertion of error. I think that they would ask me what error I was claiming had occurred, and then they would make some calls. If they don't have that practice now, they will certainly adopt it in the face of this new fraud tactic.

Anyhow, good to see a couple of UK members here, and immense kudos to the quatloos community. I've followed you for years, and it's an honour to finally post here.

[littleFred]

I mentioned above that "Nataliedeakin says she got £3700 back for a phone bill." I suppose the bank clawed back from the phone company, which seems to be less than happy and are chasing her for the money, "threatening debt collectors etc if i dont pay this back".

The GOOFy advice is simple:

I wouldn't worry about debt collectors

[Normal Wisdom]

"Will the clawback affect my credit history" i.e. will the fact that I stiffed the phone company out of £3,700 by underhand use of the DD mechanism cause me problems in the future? Obviously not - I'm sure everyone will have a good laugh about it.

[Hercule Parrot]

It seems my previous confidence in UK banks was misplaced, and some of the GOOFY's are receiving refunds obtained by blatant fraud. The bandwagon is picking up speed, as greedy, naive or desperate people jump onboard.

It's like reading a slow-motion train wreck. Don't these people realise that court proceedings, debt collectors and bailiffs will be used to recover the money they have wrongfully claimed? Some of the false claims are so bogus that a criminal prosecution seems feasible, and it may be necessary to jail a few of them to bring this to a halt.

facepalm.

[notorial dissent]

Why on earth did they write legislation that allowed this sort of fraud to take place? I can't begin to imagine that any real level of thought was put in to it or the ultimate results of it.

[ArthurWankspittle]

Why on earth did they write legislation that allowed this sort of fraud to take place? I can't begin to imagine that any real level of thought was put in to it or the ultimate results of it.

It is an abuse of consumer protection offered by the banks. I'm sure it was created to prevent fraud by people setting up DDs and mistakes by organisations setting up DDs. e.g. someone mis-types account number but it is valid. Customer gets bill for debt that's not theirs. The banks offer this consumer protection so that they refund the customer in this situation and take on the problem themselves.

[notorial dissent]

Without at least doing a little pro forma investigation??? US banks do pretty much the same thing, but they at least look at the claim beforehand and handing out free money. Then it turns in to bank fraud otherwise, real quick.

[littleFred]

I don't think there is specific legislation on UK Direct Debit. The rules behind the scheme seem to be in "The Service User’s Guide and Rules to the Direct Debit Scheme", which is behind a wall.

A bank can refuse a clawback. The consumer can then complain to the Financial Ombudsman Service, who provide some some example decisions.

For a bank, if they can pass the clawback to the originating organisation, that would be far easier than bothering to investigate an error. So I expect that legal action against fraud will initiate from originators.

[Hyrion]

Why on earth did they write legislation that allowed this sort of fraud to take place?<snip>

It is an abuse of consumer protection offered by the banks. I'm sure it was created to prevent fraud by people setting up DDs and mistakes by organisations setting up DDs.<snip>

A security problem that's been in the works for ages.

When direct debits first came into the picture I had some concerns about it. I particularly didn't like the idea of someone charging me when they were not supposed to so I wondered at what kinds of safety mechanisms banks had installed in the process.

Answer: none!

Any issues are "between you and the charger".

So instead of a proper solution, what did the banks do? Install yet another system where there's no checks-n-balances in place to prevent fraud from the other direction. Nice.

Proper Solution - Yes... any of you Bank Individuals reading this, take this back to your security advisors and ask how well this would work to stop the fraud on both sides - or at least, catch it in the very begining instead of letting years trail on. Note that this solution applies to on-going payment systems, not single one time payments.

Proper Solution (Yes, it's worth saying twice):

Step 1: Service/Product provider sets up payment structure

Have a process in place in which the service/product provider can set up a direct debit payment flow. This includes all viable information. Amount of payment, time frame in which the payments are made (once per calendar month for example), date on which payment is made, max amount payment that can be charged, etc. In short, the necessary components that make up an on-going direct debit arrangement.

Step 2: Account holder confirms/denies payment structure (today, this is sadly missing)

After that, the account holder is informed by the bank of the terms of the payment struture and must explicitly confirm the structure within 2 weeks (a reasonable time frame). If the account holder does not do anything or denies the structure, an official letter from the bank is sent to both parties indicating why the direct debit service arrangement will not proceed and that the two parties need to speak with each other about the situation.

How's that for a nice easy solution to put a halt to most of the banking issues surrounding the setup of on-going direct debit payments? Note that this assumes the direct debit service provider is not the bank itself (that's a much clearer relationship). Additionally it does not take into consideration any liabilities the bank might face by refusing said service to vendor/client.

But it sure seems to me it would be an elegant solution to avoid the bulk of issues in that particular category.

[littleFred]

Acydman bought a car and paid for it with Direct Debit. Then he clawed back the DD. Now he is being taken to court for £17k.

But he has them in "e-stoppel", so I'm sure it will work out fine. Possibly. Maybe.

[notorial dissent]

I would think the fraud statutes would come in to play as that is both fraud and theft, and should be treated as such. Sounds like your retail agreements aren't very sensible or solid either. The only way something like that could be reversed here is if the card holder claimed fraud and could prove it.

[PeanutGallery]

I think Acydman is going to find out that his definition of e-stoppel is very very different to the courts definition of Estoppel.

I think this can only really be fraud on Acydman's part (in fact I think it's a lot of fraud with a lot of the other complainants as the thread on GOODF is promoting criminal activity and really it should be reported to the police for an investigation, which might nip this behaviour in the bud).

[notorial dissent]

Since it is the moral equivalent of writing a bad check, I should think so.

[PeanutGallery]

I was just emailed this from BACS, the group who are pretty much responsible for the Direct Debit system.

We have seen this website before so it is very much on our radar. As you mention, there are a number of posts about exploiting the Guarantee so our legal team have been passed information on the website.

For some further information, you may find the following useful. This is much the same that we give to anyone contacting us about raising indemnity claims:

The Guarantee is not a ‘no questions asked’ Guarantee of a refund as a number of the posters claim and that a customer of a bank would have to elaborate and provide details of why they require a refund; they must explain the reasons, they cannot just demand a refund.
The text of the Guarantee also reads ‘IF an error’ – the bank will establish whether an error has been made before providing any refund to a customer and they are entitled to ask for evidence to back up such a claim. The bank can also opt to decline a claim should they wish but they will usually take the word of the customer. If a customer lies to their bank, this could potentially be seen as fraud.
The Guarantee states that any refunds that someone isn’t entitled to must be paid back when asked. What often happens on these occasions (again, some posts on the website will confirm this) is that the company that the customer originally paid will take legal action against the individual to recover the funds that they owe them contractually. Claiming a refund of a Direct Debit only refunds the money that changes hands, it doesn’t alleviate any responsibilities to meet contractual obligations that were agreed to i.e. you agreed to take a service e.g. broadband from a company for a year, you agreed to pay for this service, you need to arrange another way to pay the bill.

We have found some users of the website to be grossly exaggerating their successes as we have had a number of users contact us directly for advice of which they are given the same details about how claims work that I am giving you now.

A few choice highlights:

1) Doesn't expunge the contracted debt.
2) If a customer has lied to their bank, then yes, it potentially is fraud.
3) GOOFS are grossly exaggerating their successes, who'da thunk it!

Admittedly we knew all this (1-3 above) already, but now we know that BACS know and are looking into dealing with and combating this abuse of their system.