Not upheld: unauthorized payment / insufficient notice before debiting account complaint against Marshmallow Financial Services Limited

Decision detail

Summary

Mr S complained that Marshmallow took a payment of £73.04 from his stored card over two years after cancelling his motor insurance policy without his agreement. Marshmallow argued they had contractual authority under the continuous payment authority terms and the policy terms of business to recover the outstanding balance owed for cover received and cancellation fees. The ombudsman found the payment was correctly due and Marshmallow had authority to take it, but agreed that only one day's notice before debiting the account was insufficient. The ombudsman upheld Marshmallow's £100 compensation offer as fair and reasonable for the service failing in notice provision, and did not uphold Mr S's complaint for refund or debt recovery proceedings.

The Ombudsman's reasoning

The ombudsman found that Mr S accepted the policy terms and conditions which included authority for Marshmallow to use stored card details to recover sums due when a policy is cancelled. The insurance contract remained legally binding after cancellation regarding payment for cover already received. By paying via monthly instalments under continuous payment authority, Mr S had given Marshmallow authority to charge his card for outstanding balances even after cancellation. However, the ombudsman agreed that Mr S should have been given more notice (one day was insufficient) to raise queries or arrange alternative payment, and therefore the £100 compensation for this service failing was appropriate and fair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website