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I came home tonight to a letter from the letting agent that informs me that I must give them permission to Direct Debit my account to pay the rent.
Why is this? Why do I have to use Direct Debit?
I do not use Direct Debit with any bill because I disagree with the fundamental logic of the process. As far as I can see, it is basically permitting them to stick their hand in to get their funds at their discretion. I much prefer to do the electronic equivalent of paying them. Like every other bill I pay.
Today being, of course, Friday, I now have to wait until Monday to call them up and tell them I don’t to Direct Debit.
Of course, I have to send them a form to enable it. The letter says nothing about what will happen if I do not nor if the older method (DEFT which I pay using BPAY) will stop working, both of which strike me as a major omission and suggests to my cynical mind that they can’t force me to switch to Direct Debit.
Thoughts?
Wade.
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Hi Wade
The only real mention of methods of payment regarding rent is that there must be at least one method available that does not incur a third party fee.
You may find that your agent charges fees for other methods (thereby making direct debit the most attractive option), but they can’t force you to use it. If however, they have no other method available, then you should contact the department of fair trading to report the matter.
It seems very unreasonable of the agent to not accept a direct deposit. It would be reasonable to expect you to include identifying notation (eg. ‘7SmithStreet-AprilRent’) so they don’t have to work hard to sort out which tenants have paid and which have not.
If you check your tenancy agreement s4.7 you will find this:
Note. The landlord and tenant may, by agreement, change the manner in which rent is payable under this agreement
So the landlord needs your agreement before he can change the way your rent is paid. If you are a new tenant you might have a problem but as you sound like you have already been paying in a different manner you should be ok.
With regard to some people observing that a direct debit is a bad idea, that may be because it’s an arrangement between the respective banks, not in your case between the real estate agency and you, and when things go pear-shaped it’s up to the banks to resolve the issue, and often in their own sweet time!
As a personal example, the only direct debit arrangement that I ever had was with an insurance company, and when I cancelled the policy to change insurers the direct debit didn’t cancel. Consequently I was paying for both policies for four (4) months until the banks solved the glitch in their system/s that was preventing cancellation of the direct debit.
No problem getting a refund of the payments, but it was a totally frustrating experience because even though it was my money, there was nothing that I could do to stop insurance company #1 from taking it.
Statican mentioned DEFT and BPay; I once read somewhere there’s a hidden fee of a dollar or so in this, which goes to the big merchant bank who owns DEFT through an arrangement they have with real estate agency chains and very big strata managers. The plot thickens, maybe. Sorry about that.
I’ve written a column on this, covering the various rules and regs for each state – needless to say they are all different. Have a look HERE
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Hi Wade, I recognise your original post was from a number of months ago & therefore, you have probably sorted out your issue but if you are still interested, here is a reason why direct debit is the preferred way to pay for landlords. I now insist on this & make it a condition of renting the property due to my experience with my investment property over the past 10 years. The short reason is that the tenant is able to rely on having a place to come home to every day/week/fortnight/month to live in & the owner should be able to rely on having the rent for this place paid excactly on the day it is due every day/week/fortnight/month but unfortunately the only way to ensure this happens is a direct debit due to human nature & human error.
The long reason is, my bank takes my mortagage payment for my investment property out of my account every week on a Friday. Therefore, I need the rent to hit my account on the same Friday each week to cover this however I don’t mind fortnightly or monthly payments as I can adjust my budget for any frequency.
I manage the rental property myself as I live in the same suburb & used to explain this to tenants & ask that if they choose use direct deposit, they need to do this on the Wednesday so it can be processed & hit my account on the Friday – the rent is due on Saturdays. I have had too many problems with teants forgetting to deposit on the Wednesday & either do it late, so it ends up hitting my bank account on the Monday or Tuesday or following Wednesday which means they have stayed in the property for 3 or 4 or 5 days without paying for it (this becomes a problem for a whole host of other reasons which are different topics such as giving notice & exiting a rental property).
Some have forgotten to pay altogether or a bit short that week so end up being 1 week or more in arrears. I think some of them think that because they have paid a bond, it’s no big deal however these are the same tenants whom cause damage (not maliciously or intentionally) usually by doing careless things & they don’t get all of their bond back anyway after the repairs have been paid for.
The reasons/excuses I have been given for paying after the due date are: I had to work overtime & was too tired to remember, I got busy, I was sick, etc. Well guess what? If there was a direct debit in place, they don’t have to remember so it’s easier for them too. Can you imagine if I gave those excuses to my bank for being late paying my mortgage? It might sound harsh to some tenants but you have to pay BEFORE you stay & I am providing a home for them every week/forntnight/month so it is only fair that they pay for the priviledge every week/fortnight/month by the due date. If all tenants considered paying their rent a priority & never stuffed up with this, I would feel differently but I need to protect my interests & minimise risk. Interestingly, the best tenants I have had, never had a problem with paying via direct debit, they did not incur any extra costs & they were able to stop the payments easily when they stopped paying rent. I don’t understand what the drama is with doing it this way. Now I know if someone objects to this, they are not the tenant I want.
Thanks for the very detailed message.
I rather suspect your reasons are largely the same reason property managers are shifting to Direct Debit. Personally, I would never try to short the rent – I’m just not that sort of person. Until I setup an automated payment, I would often be angry with myself for mucking it up!
On the other hand, if I were renting directly off the landlord instead of using an agent, I may be more amenable to use Direct Debit. The truth is that real estate agents are amongst the least trusted of businesses, and Direct Debit requires an inversion of trust compared to other payment methods. This is the primary reason I object to it.
My property manager has assured me several times that I can continue to pay with BPAY. More, I know his own boss knows my stance on this.
There have been no more problems with my payments.
Wade.