Friday, 9 January 2015

Unethical?

So a business customer pays late and we charge late payment penalties. It happens. In fact we have a policy to credit the first instance in the interests of good will, but it makes "paying on time" more important.

But today I have someone getting all stroppy, but in a new way. I may have to update my list of excuses on www.paylate.co.uk.

He started with a rant over the dates - the invoice was for service 1st Dec to 31st Dec but on payment terms of 7 working days (which we extended to allow for a DD on or after 25th). But that makes it advance payment and so he says it is unlawful for us to charge the penalties.

He then goes on to say he will be publishing this so that others can see we are acting unlawfully and can try and reclaim any penalties we have charged!

This all looks like some attempt to intimidate us. As it happens, my accounts team credited the charge anyway as it was the first time, but he is still ranting and saying he is going to publish about our unlawful activity.

So I squashed what he was saying totally. The legislation is quite clear, if we are charging in advance, e.g. services 1st to 31st Dec due on 25th Dec, the the relevant date is when we have completed providing the service, and penalties and interest start from the following day, so 1st Jan. It is all very clear, and surprisingly fair - statutory penalties only apply if paying after agreed term and after the service are actually supplied. The catch is that he paid on 5th Jan!

So, he has one possible excuse in the bag, and changes his rant to that - instead of claiming we broke the rules in the legislation (as we clearly didn't) he is saying that because he pays by DD, we have agreed to collect the money, and we could have as we notified him on the 29th. Looking at it, it looks like it may have been possible to get a DD in sooner - but the banking system needs two banking days, and there are rules on not giving the agreed notice (in our case 5 working days) so in practice it was 5 days and hence 5th Jan. The thing is we make it clear in our terms we are offering to try one collection only within terms, and if that fails it is the customers responsibility to ensure payment is made within terms. The customer even states that we told him on 29th and he could have made a fast payment if we had sent a request for payment - well the invoice sent on the 1st Dec was a request for payment, D'Uh.

Just to clarify - the terms were 7 working days from invoice, which we extended to his preferred date of 25th, and extended to allow for 25th and 26th being bank holidays, and then allowed the time to the end of the month as was billing in advance, so about 3 levels of "grace period" over the agreed terms, all of which were missed.

It is also worth clarifying the DD thing - we only offer to try and collect once. In practice, if someone is not insisting on DD being 25th (or later) we collect on due date, or for people on end of month we collect enough working days before to try and make a second collection. So in most cases that would work. In this case, being December and insisting on 25th collection, we did not have practical time to get a second DD done, but the customer did have time to send a fast payment on there separate days and confirmed they were notified of the DD bounce, but chose not to send payment.

Edit: To clarify further, our response to his initial rant was a credit, but he went on - he said that as we had not responded to his "legal analysis" he would publish anyway, so he asked for my response, which I gave and quashed his argument, and then he went on the "unethical" argument. This is a massive sore loser!

Anyway, long story short, what really bugs me now is that he says "this is not corporate behaviour that meets the ethical standards that we require of our suppliers".

To me that is so hypocritical and just takes the piss... What did they do that is perhaps "unethical"?
  • Apparently they don't have enough money to pay the £23.90 on the agreed and notified date (this is a limited company, and makes me question their creditworthiness somewhat!)
  • Don't send payment when notified of the failure
  • Try and suggest that we acted unlawfully and quote sections of legislations to try and legal/baffle us.
  • Suggest that this unlawful behaviour will be published to get others to reclaim penalties
  • Then, when proved wrong, start suggesting we failed by not collecting a second DD (something we never said we would)
What did we do?
  • Provide service, as agreed
  • Make a DD attempt, as agreed, on agreed date with agreed notice
  • Advise them of the payment failure in time for them to pay and not get a penalty
  • Charge a penalty, as agreed in the terms, and carefully following the legislation
  • Refund the penalty, no questions asked, as a good will gesture
Maybe I simply don't understand "ethics". All I ask for any supplier or customer in a business to business relationship is to do what was agreed - nothing more.

In practice, being such an edge case, we'd have credited this even if it was not the first failure. It is rare to have a late payment penalty for a DD paying customer and requires a complicated set of circumstances and bank holidays and a bounced payment, but not something we did wrong.

Update: Lots of discussion here and on irc, and one thing I can see where we could make one small change that would have helped in this case. Basically this is an edge case where a second DD would not be soon enough. The notice saying the DD failed and when we would collect again gave the wrong impression that "nothing needs to be done". So the change I am planning to work on is that we should never send a "Your DD failed, another is being done on date X" if that date would be too late but paying now by fast payment would be OK. We should be sending "Your DD failed, and we don't have time to do another DD, so please ensure payment by fast payment before date X". Obviously if nothing happens and a penalty is issued and we have over due payments we then do normal DD notice then to collect the balance due. Such notices should be rare as we do normally have time for the second DD attempt.

Update: We have checked, and the timescale of 5 working days for a repeat collection, which in this case did not allow enough time to avoid penalties, is based on BACS recommendations. Thankfully the rules permit two working days and our system can accommodate this, so we have made changes to use 2 working days when 5 would go over the end of the month. Not quite as generic a fix as I would like but something to tackle this edge case, even though we did not guarantee to make a second collection in the terms.

7 comments:

  1. I'm struggling to understand the exact chronology of events here, but I think the stroppy customer has a point.

    Their "unethical" behaviour:
    - I don't think you can sensibly come to that conclusion based on a single failed Direct Debit.
    - As far as I can tell, they did not immediately send payment when notified of the failure because they also notified you would be attempting a second Direct Debit collection on the 5th?
    - I am not sure why you think their attempt to ensure you were acting within the relevant legislation is /unethical/? Albeit, perhaps incompetent as they were apparently wrong.
    - Again, I'm not sure publicising anything is "unethical": you seem quite happy to publicise others' errors here!
    - Finally, I again don't think you're looking for the word "unethical" for their suggestion that you should have collected a second Direct Debit.

    However, you confirmed on IRC the payment was collected by a second Direct Debit. So what actually happened? I certainly wouldn't pay immediately upon receiving notification of a failed direct debit if I had been told a subsequent attempt would be made -- I'd end up paying twice!

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    1. Interesting feedback, thanks. I do try to post here to get feedback, and some times I get told I am wrong, and should re-think things!

      To try an answer some of those points (and I have updated the post slightly as well to clarify).

      A single failed payment or ten of them, if not paid within agreed terms, then that is "late". I am not sure why a "single" payment failing makes that less "bad" somehow. As I have now added at the end of the post, in practice, we'd have credited the charges for such an unusual case anyway, and similarly if it was due to a bank error rather than just failing to have £23.90 in the bank.

      The failure notice is a tricky one - they were already over the due date and so late, but had this extra grace period to the date service was provided, and the 5th was beyond that. They could have paid within that period. It may be that we update the system to only do that second DD in that time frame if it can be within the terms that would avoid a penalty, and otherwise make the notice suggest a fast payment. I'll look in to that as an improvement.

      The publication difference is that I am not naming them. They planned to name us and wrongly assert we were acting unlawfully and incite people to cause us hassle by trying to reclaim penalties we have (lawfully) charged.

      If he does not leave as a customer, and I don't sack him as a customer, I am going to suggest we don't lock the DD date to the 25th, and even formally make the terms 30 days. That would allow more time to pay and would allow time for two collection attempts within terms.

      As for paying twice, you would not ultimately do so, even if you did at that instance. For a start, if it was paid on 29th we could have cancelled the DD, and I think even if on 30th. Also, if paid twice we'd refund the extra. Either way, it would not have been a £40 penalty.

      All of that said, I suspect his attitude is down to being broke - I mean, what kind of business bounces a £23.90 DD?

      I'll look at making improvements in our systems too.

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  2. Weird one.

    If the DD failed, then if you don't take the money again as you say you will, has he failed to pay? You left it late.

    However it might be better to offer different dates for the DD - up to the 20th perhaps, using the excuse that Christmas messes things up otherwise.

    After all, if someone said the 30th, this could also happen, & I presume you want the money before the end of the supply period anyway?

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    1. The point is that we only say we will try the DD *once* within the terms. We currently offer up to 25th.

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  3. Paying a bill or invoice late is bad manners if nothing else. I tend to pay on receipt of an invoice so I don't forget later on. If my Home ::1 wasn't strictly DD only A&A would get a Faster Payment as soon as the invoice hits my inbox.

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  4. I am of the opinion that where a payment is expected to happen automatically (e.g. a DD), and it doesn't for some reason (which may not be the payer's fault - e.g. the bank or the payee may have made a mistake), the payer should be informed and given a reasonable length of time to correct the error before receiving any penalty charges. I don't think 2 working days is really a "reasonable length of time" here - 5 working days (possibly with a bit of extra discretionary leeway during periods of national holiday) seems fairer to me.

    This opinion isn't based on any law, it's based on some common sense ideas of both sides staying on good terms. Admittedly, if a payer is persistently taking the piss and pays late every time then tightening this up is probably reasonable.

    In my (ongoing) problems with Npower, they failed to collect a direct debit for around 6 months and didn't inform me (and I didn't notice it hadn't left my account). My fuel charged gradually mounted up without me noticing (they didn't send a statement). I then received a "final demand" telling me I had to pay several hundred pounds within 9 days. Now, I'm not sure how legal this is, but it seems like a more extreme version of your example, and it certainly doesn't qualify as a way of maintaining good relations with the customer. (In my case it was the payee's fault for not collecting the DD, but even if it had not been their fault I would still have expected them to notify me that something had gone wrong well in advance of sending final demands and imposing penalty charges).

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    1. Indeed, if the failure was not his fault we would have had every sympathy, and anyway we credited him anyway.

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