Direct debit rejection fees: banks collect without scruple

Direct debit rejection fees: 21 French banks singled out

While millions of French people are tightening their belts in this period marked by the war in Ukraine and rising inflation, the association UFC What to choose calls on the political class to be tougher on the banks. Indeed, the organization pointed the finger at the billions lost each year by individuals in direct debit rejection costs. In 2020, 1.8 billion euros less in the consumer budget would have gone into the coffers of the banks: a record amount for France, compared to its European neighbours.

France, queen of direct debit rejection fees

The UFC Que Choisir compared 21 banking establishments representative of the market and accounting for 53% of the shares of the latter, according to the 2021 annual report of the Observatory of banking tariffs of the Advisory Committee of the financial sector. France holds the gold medal for direct debit rejection fees, with a legal limit set at 20 euros. Far behind, we find Belgium (with an average of 6.90 euros), Italy (2.50 euros), and finally Germany (1.20 euros).

“Such discrepancies confirm the exorbitant level of margins practiced by French banks on incident costs and which have been evaluated at no less than 86% by our association”notes the UFC What to choose in its report.

#Costs banking incidents: according to our estimates, the margins applied by the #banks are 86%. They represent 1.8 billion € reaped on the backs of consumers, costs 17 times higher than in Germany! https://t.co/tco5ztXETI pic.twitter.com/YrRZmY4qI1

– UFC-Que Choisir (@UFCquechoisir) June 7, 2022

Direct Debit Chargeback Fee: What is it?

Direct debit rejection fees are the amount deducted from a bank account after a transaction has been rejected for insufficient balance (overdraft) or exceeding the authorized overdraft. When the transaction is rejected due to an overdraft, this is called a payment incident fee.

“When the payment is authorized despite an account in the red, an intervention commission is debited to the legal ceiling of 8 euroswith the exception of the Banque Postale which charges 6.90 euros per transaction, notes the UFC Que Choisir. One in four banks (24%), all members of the Banques Populaires – Caisse d’Epargne Group, can think of nothing better than to increase the bill by sending their customers a ‘newsletter’ at 10.70 euros in mean “deplores the association UFC Que Choisir.

20% of the direct debits turn out to be overpayments caused by duplicates of #costs rejection! We provide you with a standard letter to obtain reimbursement of rejection costs. #Specimens charged in duplicate 👇https://t.co/Rarl8Fknqj

– UFC-Que Choisir (@UFCquechoisir) June 7, 2022

If the consumers can obtain the refund of these salty expenses often doubled with a few days of interval only (thus leaving little time to the consumer to bail out his account), the organization, who provides a standard letter to make his requestasserts that a majority of banking establishments “reluctant” to return the money. “Apart from La Banque Postale and BRED Banque Populaire, which automatically retrocede the entire excess charge, 90% of banks simply do not inform their customers of this right on their rate card.

Direct debit chargeback fees: why is it so expensive?

There is a huge difference between the fees displayed by French and foreign banks. For Serge Maître, spokesperson for the French Association of Bank Users (Afub) interviewed by Marianne on the subject in 2019, banking establishments must align themselves and stop “to tax” consumers.

“Among French bankers, there is no self-regulation and all the policies that have tried to regulate the market have ended in failure. The last intervention dates from 2007 and capped the costs of direct debit rejections at 20 euros. At the time, that wasn’t a big problem, because direct debits were still minor compared to check returns. Today, the phenomenon has reversed: against 1 billion direct debits per year in 2007, we now count more than 4 billion.explains the expert, who summons the Minister of the Economy Bruno Le Maire, to put in place a regulation.

Matthieu Robin, Deputy Head of Studies, was on @TF1 to talk about banks’ excessive chargeback charges. A drain estimated at 1.8 billion euros on the consumer budget.
Our requests https://t.co/tco5ztXETI
https://t.co/sJgcCdu7qW

– UFC-Que Choisir (@UFCquechoisir) June 8, 2022

Direct debit rejection fees: billions in the pocket… of the banks

In the end, it is the banks that come out on top, as UFC Que Choisir reminds us. “20% of direct debit rejection fees are due to overpayments for the benefit of banks. A rejected direct debit is resubmitted by the creditor within four to ten days. Consequently, it causes, if the account has not been funded in the meantime, duplicate costs estimated at approximately 400 million euros in 2020“. A financial mistreatment denounced in the light of the legislative elections.

“Determined to tackle the income from banking incident costs and free up at least 1 billion euros for the consumer budget in the context of high inflation, the UFC-Que Choisir urges the Government as part of its purchasing power bill to:

• Cap incident costs based on the costs actually borne by the banks;
• Extend the overall cap on banking incident fees to all consumers;
• Impose the automatic reimbursement of duplicate direct debit rejection fees. »

These costs, which apply in particular in the event of rejection of direct debit, are at the origin of a “scandalous bank drain of 1.8 billion euros on the consumer budget”, according to the association which notes “the inefficiency competition” to curb them #AFP

– Agence France-Presse (@afpfr) June 7, 2022

How to avoid direct debit fees?

Online banks are those that do not have any direct debit rejection fees, such as Boursorama Banque or Mona Banq. It is for this reason that they remain the cheapest on the market and the most attractive.

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