Debt collection on a paid off Closed Credit Card

Lworldaroundus123 on 06/05/2020 - 23:02
Last edited 07/05/2020 - 01:49

Hi,

Today I answered a call from a collection agency informing they're collecting on behalf of a bank for an amount of over $500 on an outstanding credit card.
The credit card was closed since August 2017 with all outstanding balance paid and final statement issued directly to me. I no longer banked with the bank since the closure of the credit card, and the only product I had with them was the credit card.

I called up the bank and confirmed it was not a scam call, and there is indeed $500AUD merchant direct debit charge from a US company during March this year (yes this year). I asked "how was this possible given the credit card was closed from almost 3 years ago". The consultant on the phone said "we try our best to reject charges on a closed account however sometime they can force it through". I was pretty upset at this poor system control. I said I want to dispute the transaction as it was an unauthorised transaction. During the phone call, I had no idea what this US company is however afterwards taking some time to think and looking through my other emails, I remember purchasing an once-off service back in 2017 which in this case automatically renewed without me knowing and triggered this charge. I haven't used this service since 2017 and it has came back to haunt me.

Given I no longer bank with the bank, I wasn't able to see the transaction coming in. I started digging through my email and it shows I received an email from the bank on 19th April saying "online statement is now available…please login" which I obviously cannot do (I also ignored it as I closed all accounts 3 years ago). The email was received on 19th April and it has barely been a month, and the bank is immediately getting a debt collection agency without any form of direct communication. Can they do this?

I'd love to seek some help about what can I do here to ensure I don't get hit with the $500 cost and remove the possible bad credit rating on my name? I was hoping to get a mortgage this year…

Cheers.

Financial

Comments

  • ode1online on 06/05/2020 - 23:13
    +3

    Maybe start here https://www.ombo.nsw.gov.au/complaints/making-a-complaint

    • conan2000 on 06/05/2020 - 23:31
      +4

      Yeah, tell them you will raise a complaint with AFCA given the situation and the potential impact to credit ratings. Most banks will waive/sort out for insignificant amounts like this as the cost of dealing with the complaints outweighs the amount of money for recovery.

  • garetz on 06/05/2020 - 23:17
    +3

    You can argue that as soon as you cancelled the credit card you stopped being their customer, and so have no obligation to pay any transactions approved by them after the closure date. That is their responsibility, so they need to charge back the transaction and not bother you with it.

    However life isnt always so easy, so ask to make a complaint, and see where it takes you.

  • burningrage on 06/05/2020 - 23:18
    +8

    "The consultant on the phone said "we try our best to reject charges on a closed account however sometime they can force it through"

    What sort of bs pass thru comment is this? A closed credit card is just that, closed. What's the point of closing it if things can still be charged on it?!

    Yep. Should lodge a complain to ombudsman about this.

    • Samsungnote10 on 07/05/2020 - 00:41

      Reply
      "I try my best to pay off my bills but sometimes the payments bounce"

      And see how stupid their statement sounds

      • burningrage on 07/05/2020 - 15:46

        LOL! I'd love to say to my energy provider next time seeing my bill is gonna skyrocket due to this virus thingy.

    • jamescavs on 07/05/2020 - 11:17

      That sounds like the bank has horrible security measures in place if someone can force a charge on a closed account. Surely there's a process in place somewhere so the bank receives a big fine for this.

  • nedski on 06/05/2020 - 23:31
    +3

    You need to speak to the Australian Financial Complaints Authority (AFCA). They are best suited to deal with this.

    Tell the debt collect that you dispute liability for the debt and want to put collections on hold. Also tell them that you are making a complaint to AFCA.

    Also advise them that you are recording every call you have with them. That will make them more careful with any threats that they make verbally.

  • okbianca on 06/05/2020 - 23:40

    Hmm. I work at a bank and this doesn't seem possible - never hear of banks allowing a transaction if the credit facility has closed completely. Can you ask them for specific information like the date of the transaction and the date of card closure?

    There are also various things that can happen to a card that a lot of customers assume is a "closure" when it's not really in fact closed.

    • Mechz on 07/05/2020 - 00:33
      +1

      A lot of transactions can still go through unfortunately even when there are blocks put on a card (used to work at Westpac many years ago). It really does depend on how the merchant processes the transaction.

      I do side with the op and believe the bank is at fault here because the card probably should have expired by now so a lesson for readers might be to get the expiry date of your card changed to the next month when closing to stop a lot of these issues (although it still probably won't be 100%).

      • okbianca on 07/05/2020 - 01:53

        A block is not a full card closure. OP said the card was paid off and completely closed.

        • worldaroundus123 on 07/05/2020 - 08:45

          Yes, that’s what I assumed to be the case when I called to cancel the credit card and stop banking with them. I even got a final statement issued via email (with separate password).

          Unless cancelling the credit card < > closure of the credit card account (that was my only product with them)?

          The transaction date was in March, so pretty weird how the card was technically still usable 3 years after closure.

          Might argue my case that it was their system’s fault for this.

          • okbianca on 07/05/2020 - 11:02
            +1

            @worldaroundus123: Yep. Sometimes "cancelling" a card restricts the facility (so you aren't really able to make transactions anymore) which we call a cancellation but the account itself remains open. It's a lot of technical, internal jargon but it's relevant when it comes to cases like these unfortunately.

      • Typical16-bitEnjoyer on 07/05/2020 - 09:29
        +1

        +1

        A lot of transactions can still be processed.

        It won't help that OP likely had a debit agreement and previously made payments to that vendor.

        Regardless, OP should not speak to AFCA, but threaten calling AFCA directly to the bank. It's only $500. Press hard and they'll wipe the charge pronto :)

    • thatonethere on 07/05/2020 - 09:55

      You should check out your banks credit card PDS - they specifically say while you can close a card you agree to pay future charges to the closed card.

  • gmail92 on 07/05/2020 - 01:07

    I had a nightmare closing my last credit card given there was a transaction that went through after they told me it was closed (Accidentally recharged Opal using the linked "closed" credit card - which actually went through. I contacted both Opal and my bank which said it was not possible and should bounce, but it did go through.)

    The closed card disappeared off by online account but still was in online statements that I didn't check. I followed up since it hadn't updated my credit rating. Given the circumstances I paid off the balance and got them to waive all the built up fees and close it properly for good.

    It's likely that is a legitimate charge though. You should follow up with the bank and get them to send you the final statements and see where you probably spent and forgot about it.

  • Okayy on 07/05/2020 - 03:40

    we have identical post on OZB

  • sw0rdy on 07/05/2020 - 08:06
    +1

    Check your credit report - does it show up there as an active account or closed? Check both Experian and Equifax - use Clear Score for Experian and get Equifax report directly from Equifax (should be free).

  • kahn on 07/05/2020 - 08:11
    -1

    This topic was discussed only a few months ago. Please check the existing forum threads before creating a new one.

  • HeWhoKnows on 07/05/2020 - 08:26

    OP cancelled the card
    Effectively OP has cancelled the use this card and the bank has terminated your agreement.
    Its excatly what banks do when you get your card stolen to stop all future unauthorised transactions on the stolen card!
    Not sure whats in the fine print but I would think any charges that flow through after the card is cancelled should be automatically rejected.
    I'd say its the bank's problem and not OPs
    Especially for a card that was cancelled 3 years ago!

    Tell the collection agency the card was settled up and cancelled 3 years ago and you have no more obligations with this card and to take the debt up with the bank.

    • thatonethere on 07/05/2020 - 09:51

      See below - unfortunately while you can close a card, you agree to pay for future charges…

  • thatonethere on 07/05/2020 - 08:45
    +1

    I was looking at my NAB PDS to see what it says and pretty much once you sign an agreement with a bank for a credit card you are stuck with them forever as a charge could arrive 10 years later (although probably only thing to stop it would be the expiry date of the card which MAY stop the transaction occuring)… all very convenient for the banks!

    17.5 Agreement continues after cancellation or closure
    This agreement will continue after a card is cancelled
    or your account is closed under 17.1 or 17.2, until:
    – the whole of the unpaid balance of your account
    is paid; and
    34
    – any amounts subsequently debited to your account
    are paid (whether the amounts are accrued or
    charged before or after the cancellation or closure).

    • burningrage on 07/05/2020 - 15:49

      Hope this is not universal.

  • Typical16-bitEnjoyer on 07/05/2020 - 09:27
    +6

    PSA

    ALWAYS follow the process for lost/stolen card. Wait until you receive the new card THEN close the account.

    Reporting a credit card lost/stolen will generate new card details and avoid this exact situation :)

    • Mechz on 07/05/2020 - 11:20
      +1

      Even that doesn't work in all situations depending on how the merchant processes.

      • Typical16-bitEnjoyer on 07/05/2020 - 12:19

        Yes, they can slip a transaction through. That's why you report it lost\stolen. Minimal effort to get it reversed/wiped. :)

  • tio on 07/05/2020 - 10:18
    +2

    had similar issues with Citi, they blamed it on the merchant for setting up the payment as recurring/subscription. Even though charges came in sporadically.

  • John Kimble on 07/05/2020 - 10:56

    I remember purchasing an once-off service back in 2017 which in this case automatically renewed without me knowing and triggered this charge. I haven't used this service since 2017 and it has came back to haunt me.

    So it's a legitimate charge (like a Netflix or Spotify subscription), but on a closed card.

    If the bigger picture is to get a mortgage, then one option is to pay off the debt and explain the situation to the debt collector so they can remove the possible negative entry.

    You could then separately try and recover the money from the merchant I suppose, but that is unlikely to succeed.

    • worldaroundus123 on 07/05/2020 - 11:08
      +1

      The original was legitimate as I inputted my card details and purchase it - however the auto renew was unknown to me so can I argue it's unauthorised? The view is just because I shopped at let's say I shopped at a store one day doesn't give them justification to charge me later. However, this could be dependent on the user agreement, etc etc.

      • John Kimble on 07/05/2020 - 11:17
        +1

        Normally you could argue with a charge back, but I dunno if you can now as the debt has already been transferred to the debt collector.

        But if it was a subscription or something that you didn't realise (probably in the fine print), it's possible you wouldn't have won the chargeback anyway.

      • Typical16-bitEnjoyer on 07/05/2020 - 12:21

        What sort of subscription is $500AUD??

        • worldaroundus123 on 07/05/2020 - 12:24

          Web hosting - initially it was $99 USD for 3 years (sale). However it seems afterwards it is $7.99 per month (same term so $8 * 36 USD). FYI the website isn't updated and zero visits consistently.

          • gmail92 on 07/05/2020 - 12:38
            -1

            @worldaroundus123: You've paid for the service and received it, so whether or not people visit your site is immaterial.

            So that's totally on you then. Time to pay up.

            • worldaroundus123 on 07/05/2020 - 13:03
              -1

              @gmail92: As I mentioned, I was under the impression it was an once off service with no renewal. Of course there is fine prints etc and I should’ve taken more care to manage it.

              The payment should’ve bounced and the website shut down, however it still went through, I was not informed of an outstanding credit card payment and debt sold off immediately to collection agency.

              I checked the website and it says full refund within 30 days of renewal and not possible after. However it has been more than 30 days since the charge (didn’t even know the charge went through the bank) - I’ve sent an email to the hosting service to see what they can do.

              • burningrage on 07/05/2020 - 15:52
                +2

                @worldaroundus123: What should have happened is instead of letting the charge through, it should have bounced back for them to prompt calling you to say the card is no longer working.

                I guess if there is a lesson to this is to minimize the use of direct debits / autorenew.

              • Love a bargain on 07/05/2020 - 21:58

                @worldaroundus123: You WERE advised of the balance by those statements that you didn't bother enquiring about. Even though you might have lost access to online banking, surely you could have picked up the phone and ask.

                • worldaroundus123 on 08/05/2020 - 00:08

                  @Love a bargain: What do you mean advised?

                  I got the final bank statement 3 years ago when I closed the account, and I only got an email mid April from bank saying an eStatement has been generated however I get them all the time from accounts which I have cancelled before (I even get emails from a phone company that I decided not to sign up to in the end saying balance is negative 40..should I enquire that they should pay me $40?) So why should I always check up on them?

                  • Love a bargain on 09/05/2020 - 00:26

                    @worldaroundus123: They've notified you. You chose to ignore it. Simple as that. If you'd bothered to check, you'd have found out earlier and might not be in this situation now.

                    As others have pointed out, a CC contract states that you're still liable to things that might be charged to your account even after the account is closed.

                    Vodafone kept sending me statements saying they owed me a few dollars every month for a few months after I cancelled my postpaid service with them. And, yes, I told them to give me the money and stop sending me statements. (But if it's a bill error, as in your telco example, I'd still have contacted them and told them to stop. It's not that hard.)

            • fredblogs on 07/05/2020 - 16:16
              +1

              @gmail92: Wrong. The payment should have been declined and the merchant cancels the service. Of course OP should not pay up.

  • minniethemoocher on 07/05/2020 - 16:10
    +1

    Also contact the merchant. I’m not sure they will refund the charge but make sure the one-off service renewal is cancelled for future, you don’t want this happening again.

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