Not upheld: service failure and inadequate communication regarding direct debit dormancy complaint against Clydesdale Bank Plc (trading as Virgin Money)

Decision detail

Summary

Mr H complained that Virgin Money failed to process a direct debit payment to his credit card in September 2025 and provided inadequate explanation. Virgin Money attributed the failure to dormancy rules under the BACS scheme, as the instruction had not been used for over 24 months. The ombudsman found this explanation most likely correct and that Virgin Money was not responsible for the dormancy rule itself. However, the ombudsman agreed that Virgin Money should have warned Mr H about the dormancy risk, particularly since Mr H had specifically checked before the due date. The ombudsman upheld Virgin Money's position that the £130 compensation already paid was fair and reasonable, and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman concluded that the direct debit failure almost certainly resulted from the dormancy rule under the BACS scheme, whereby instructions unused for 24 months can be cancelled by the paying bank. This explanation was supported by both Virgin Money's account and the paying bank's statement that the instruction wasn't set up. While Virgin Money was not responsible for the dormancy rule itself, it should have been aware of the possibility and warned Mr H, particularly since he had specifically checked before the due date. The ombudsman found that Virgin Money's £130 compensation appropriately addressed the avoidable inconvenience caused by the lack of warning.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website