Not upheld: Direct Debit Guarantee refund claim - dispute between parties complaint against Nationwide Building Society

Decision detail

Summary

Mr L requested a refund of motor vehicle finance payments under the Direct Debit Guarantee, claiming the underlying finance agreement was unlawful and lacked consideration. Nationwide refused the refund after investigating, and Mr L brought the complaint to the FOS. The ombudsman found that the DDG is designed to protect against payment errors, not to resolve disputes between parties about the validity of underlying agreements. Since Mr L had authorized the direct debit in 2022 and made consistent payments for 3 years before disputing the agreement in September 2025, the DDG did not apply. The complaint was not upheld.

The Ombudsman's reasoning

The Direct Debit Guarantee is designed to protect customers from errors in payment amount or frequency, not to resolve disputes between parties regarding the validity of underlying agreements. Since Mr L had authorized the direct debit and made payments for 3 years before disputing the underlying finance agreement, this constituted a dispute between parties rather than a DDG matter. Nationwide was reasonably entitled to investigate whether the DDG applied before making a decision. Even if refunded, Nationwide would have been entitled to request repayment.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website