Banks trying to change the rules by bad use of wording.

As you probably know I have a gripe with banks over their use of the term "fraud". When someone pretends to be me and fools the bank in to paying out money which the bank then debits from my account with them - the person who has been defrauded is the bank, and not me. The person lied to was the bank, not me. So I really hate that when that happens ALL of the wording and communication from the bank is worded as if I have been defrauded and the bank is helping me sort it out and reclaim the money. In actual fact the bank has been defrauded, and so has no right to have debited my account and so must credit it, and then I am helping them with their fraud by providing information. They twist the wording and most people fall for it.

However, today, I see another case of mis-wording things to somehow "take the bank out of the loop". This is the same principle as the fraud thing - by making me the one defrauded they sort of take themselves out of responsibility, which is bullshit.

I refer to the Direct Debit Guarantee.

I am trying to claim a refund under the guarantee from Barclays, and for some reason they have taken nearly a week to provide the immediate refund that they guarantee, and at each step they refer to "my indemnity claim".

So, it is worth explaining to people how this works so that you know.

  • I authorise the bank to debit my account at the request of someone else (the "originator") - this is the Direct Debit Instruction.
  • In return the bank offers me a guarantee that if a mistake is made the bank will give me an immediate refund.
  • Quite separately, the originator offers all banks in the scheme an insurance (an "indemnity" agreement) that if the bank loses out because of the DD guarantee, they will pay the bank.
  • This means the bank make an "indemnity claim" against the originator after they lose out because they had to refund me.
This means there are two distinct and, in principle, unrelated things that happen here. I claim my refund. The bank make an indemnity claim.

This is quite important as, in theory, things could go wrong with the indemnity claim - e.g. what if the originator no longer existed (e.g. a refund on an old DD after originator has gone bust)? Well, in that case the bank is still obliged to refund me under the Direct Debit Guarantee that they provide to me. However the bank will have nobody to claim from, and so the bank loses out. Not me!

There are other cases. The originator can make a "counter claim", claiming from the bank that the bank should not have made the refund as "there had been no mistake". In that case, the counter claim provides the bank with the evidence necessary to reverse the refund on the basis that they should not have paid out on the DD guarantee, and they refund the originator as part of that counter claim. The bank can then use that evidence to reverse the refund.

So why are the bank messing about calling it "my" indemnity claim? I can only assume they are trying to extricate themselves from the process. I.e. if for some reason the claim does not work, they would try and reclaim the refund, because it is "my" claim and they are just helping me make it. This is, once again, bullshit.

Why does it matter?

In both cases we are seeing more and more people fooled by the wording and really believing that they are making an indemnity claim or they are the victim of fraud. Over time that will be what everyone thinks, even lawyers, judges, and politicians. It is a gradual change of perception, and before long the practical aspects of such things will end up as the bank have changed the rules without actually any change in the law or the guarantee or contracts.

I think banks should not be allowed to bend the truth like this.


  1. This sounds like something that Ross Anderson would be interested in.

  2. Since banks stopped paying interest on current accounts surely their main feature now is keeping your money secure. Otherwise we might as well stuff our mattresses with cash.

  3. Please start AAbank - I certainly need about 18 accounts on day one for for various activities. Thanks.

  4. Had pretty much exactly the same problem with The Halifax some years ago - their definition of "Immediate refund" was interpreted as "In a week or so after we have investigated it and found your claim to be valid.". Grr.

  5. This is interesting. Firstly Mitchell and Webb have a radio sketch about this that you might like.


    Secondly, I had a dispute with a mobile phone company who, due to their own data usage meter not updating in real time (it updated at the point when a PPP session came to an end, I believe), charged me an enormous sum of money for exceeding my download limit. I was paying by DD and although I managed to resolve it with them directly, I was planning to go to the bank and reverse (or whatever the correct term is) the direct debit.

    What appealed to me about this is that it put the ball in their court, in the sense that if they really thought they were legally entitled to this money, they or a debt collector could take me to court over it, rather than me paying the money and wasting considerable time going to court to get it back again.

    I was under the impression that a customer invoking the DD guarantee was no-questions-asked from the bank's point of view. I.e. the DD system is not there to guarantee that an originator gets paid.

    From what you're saying it sounds like this approach would have resulted in a "counter claim" from the mobile phone company. Which would mean the bank have a mediator-like role to play in the process, which I didn't think they would want or have time for.

    I might add I've made perhaps eight credit card chargebacks over the years (with a higher standard of proof required than for a DD reversal, as I understood it) and never had one countered or denied.

  6. Rev K, how much more grief are you going to take before you kick Barclays into touch ? I know all teh big banks are rubbish, but Barclays are truly in a league of their own....

    1. So much is now on Starling, doing a bit at a time, Barclays are so much taking the piss now.


Comments are moderated purely to filter out obvious spam, but it means they may not show immediately.


There are lots of ways to debug stuff, but at the end of the day it is all a bit of a detective story. Looking for clues, testing an hypothe...