Small change

Loan agreement between Ray and the payday lender

Ray borrowed $200 from a payday lender. The loan agreement said Ray would need to repay the loan in two payments of $138.88 on a Friday, two weeks apart. Ray’s own pay day was not regular so he clarified with the payday lender that the payments were due on a Friday, as he would make sure he had enough money to make the payment then.

Payment debited earlier than expected

Unfortunately, the payday lender debited Ray’s account at midnight between Thursday and Friday. There was not enough money in Ray’s account and the direct debit was dishonoured, incurring a $15 dishonour fee with Ray’s bank, a $4 dishonour fee with the payday lender and additional loan interest of $7.95.

Ray complains to the payday lender

Ray emailed the payday lender on Monday explaining he understood that the payment would come out of his account during business hours on Friday. Ray undertook to make up the missed payment manually, and said he would make sure cleared funds were in his account by 10pm on the Thursday to make sure there were no problems with the next payment.

When Ray did not receive a response by Wednesday he emailed the payday lender saying he would make the final payment of $138.88 on the Friday as agreed in the contract, then close his account. The payday lender debited his account again on the Thursday night, this time for $150.83. The $150.83 included a dishonour fee and additional interest.

We referred Ray’s complaint to the payday lender

Ray telephoned us later that Friday saying that he had spoken to the payday lender who had sworn at him, then hung up the phone. As it appeared the complaint had not been considered by the payday lender’s internal complaints process, we referred the complaint back to the payday lender.

Payday lender’s response to the complaint

The payday lender replied to Ray saying:

  • midnight is the start of a new day, so the debit at midnight on the Friday was in accordance with the loan agreement
  • Ray would not have been told the payment would be debited during business hours
  • no one else has a problem with the system
  • it was reasonable for its staff member to hang up on Ray given the nature of the abuse during the phone call
  • Ray’s bank statements showed lots of dishonours
  • Ray’s email on the following Monday did not ask for a response.

Finally, the email closed:

Ray, I don’t think we are the issue here, or at fault, but as the dishonour amount is $7.95 it simply isn’t worth any more of mine or anyone else’s time, so good news! I’ve grabbed some parking meter money out of my car and there is $8 waiting for you at the counter of the [redacted] Store. You can keep the change.

Ray’s view

Ray contacted us again saying he did not accept the payday lender’s response because it did not acknowledge that the payday lender had done anything wrong. Ray also noted that the $8 offered did not include the $15 dishonour fee charged by his bank or the $4 dishonour fee charged by the payday lender.


We contacted the payday lender and asked whether it would like to reconsider its response to Ray. The payday lender replied that it was confident of its position, and did not consider any compensation was appropriate.

We reviewed the payday lender’s file and saw that the loan agreement said payment was due on the Friday, and Ray’s bank statements showed the debit was processed on the Thursday. It seemed to us the payday lender had debited Ray’s account a day early. We could see from Ray’s statements that there was enough money in his account on the Friday to make the payment.  We considered Ray was doing his best to honour his obligation and was genuinely confused when his payment was dishonoured.

We suggested the payday lender pay Ray $26.95 in full and final resolution of the complaint.


Both Ray and the payday lender accepted our suggestion, and the complaint was resolved on this basis.

Our insight

This complaint should never have escalated to us. Although Ray’s email about the dishonoured payment did not explicitly ask for a response, it was clear he had a complaint. The payday lender could have easily reversed the dishonour fee and interest, contacted Ray and explained the next payment would be debited at midnight between Thursday and Friday. The failure to address the complaint, and the adversarial approach taken, unnecessarily complicated what was a straightforward and low value complaint.