The dangers of direct debit and water charges

Auckland tenant Simon Carter usually pays $25 a month for water costs, so he was shocked to find Watercare had taken $319 out of his bank account by direct debit last week.

The reason for the big bill was that it included $289 for “wastewater fixed”, which was an annual charge the landlord was liable for.

Under the Residential Tenancies Act, tenants are responsible for monthly volumetric water charges that are due to the tenant’s use of the premises, Tenancy Services says.

If the water supplier has a fixed charge for water, whether the property was occupied or not, then the landlord is responsible for the charge.

Generally, landlords pay the bill, and then pass on the volumetric charges to their tenants for reimbursement, but they can authorise their tenant to receive and pay their monthly bills.

Carter said Watercare’s records showed he was the tenant, but because his landlord had authorised him to pay his volumetric water charges, and he paid the bill by direct debit, it had taken the annual fixed charge from him too.

“I contacted Watercare and was told they can’t transfer the money back to me until the landlord paid the charge.

“Instead I was encouraged to get my landlord to pay up, so the net result is that I ended up as Watercare’s unpaid debt collector. It is a lazy, cynical way to get their money.”

The charge emptied his bank account until his next pay day. That was inconvenient for him, but could have been a serious problem for somebody in a more precarious financial situation, he said.

“I have no beef with my landlord, who refunded me the amount very quickly when I told him what had happened, but I found Watercare’s response to the situation rather shocking.”

He felt the organisation was hiding behind its terms and conditions, that its action was morally wrong, and that many tenants could easily end up in a similar situation.

Watercare head of retail operations Evan James said when landlords authorised tenants to receive and pay their monthly bills directly, they also had to arrange reimbursement of the fixed charge with them.

To simplify this, landlords could opt for the fixed wastewater charge to be paid in a one-off sum, so they would only need to reimburse their tenant for the fee once a year, instead of monthly, he said.

“Landlords who choose to pay the fixed charge in a one-off sum should advise their tenant, and payment terms are 21 days, so the landlord and tenant have this time to agree how the charge will be paid.

“If they have authorised their tenant, the tenant will also receive a bill. A direct debit will only be taken on the invoice due date, which is 21 days after we send the invoice.”

But if the landlord had opted for the tenant to pay the water charges, and the tenant had set up a direct debit, Watercare had the authority to direct debit the account on the invoice due date, he said.

“To modify payment authority for the account, we advise the owner of the payment authority to get in touch with us.”

Watercare had no current record of any complaints from tenants about the one-off lump sum.

Carter said there was no clear, visible warning of an unexpected or unusual charge on the bill he got, and as his bill was always in the $25 to $30 range he did not check it.

“The argument that it’s on me, because I should have checked my bill, is very weak, and a distraction device. They must know they did something that most people would see as underhand, dishonest.

“The issue here is that Watercare should not take money from a tenant to pay the landlord’s bill.”

A Tenancy Services spokesperson said if tenants set up a direct debit with Watercare they had to make it clear that any fixed charge they were not responsible for was not authorised to be taken.

“This is why landlords should pay the water account and ask the tenant to reimburse them for charges the tenant is responsible for – to avoid these types of situations arising.”

She said Carter should discuss amending the way the water account was paid with his landlord, or discuss with Watercare what payments they were authorised to take.

Auckland Property Investors Association general manager Sarina Gibbon said Watercare direct debiting the fixed charge from a tenants account potentially left the landlord in breach of tenancy law.

Some landlords liked to pay water bills the traditional way where they got the bill every month, and passed the variable charges on to their tenant, she said.

“But others don’t and the system could be modernised, and made more reflective of what customers expect from a billing agency.

“In this day and age is it really that hard to split the bill into separate streams of income for variable and fixed charges, and send different bills to the landlord and the tenant?”