The $1.65 direct debit Victorian weekly rental payment system dispute

A tenant’s annoyance at having to pay an extra $1.65 in direct debit fees on top of his monthly rent prompted him to go to VCAT – and have it scrapped.

The case is significant because it’s believed thousands of landlords – through a third party - are collecting rent online or by phone via direct debit. This incurs a fee which the tribunal has ruled is unjust.

And that decision – by VCAT deputy president Ian Lulham - has thrown the legalities of the whole direct debit rental payment system into question.

‘’Clearly, I have concluded that the strength of (tenant) Mr Palmer’s claim in this proceeding is overwhelming,’’ Mr Lulham told the tribunal.

Michael Palmer, 41 leases his property through Ray White Real Estate for $2303 a month. After several months he was puzzled to see on his bank statements that an extra $1.65 was being deducted with each rent payment.

That caused him to take the landlord to VCAT to seek a refund of eight payments of $1.65 and damages of $3355.35.

At the hearing, VCAT heard that Mr Palmer had originally signed a consent form allowing a monthly direct debit of the rental – and that the system being used provided for a non-refundable transaction fee of $1.65 to a third party service.

But Mr Lulham ordered that, under the Victorian Residential Tenancies Act 1997, landlords could not demand from tenants a fee or charge relating to the establishment or use of direct debit facilities for rent payments. They should absorb the costs themselves.

He ordered that the landlord pay Mr Palmer $13.20 and $38.80 costs. He dismissed the tenant’s claim for damages and referred the matter to Consumer Affairs Victoria.

Lisa Pennell, of Ray White Corporate, said the company’s legal understanding was that, provided the tenant has the choice of paying via direct debit through the service, it could keep charging a fee.

‘’We’ve asked to meet with CAV and we’ll wait and see what they have to say before making a final decision,’’ she told Property Observer.