Banks can make it very difficult for departing customers to leave them, writes Laura Slattery

You are in a long-term relationship with your bank. You opened your current account with them in your late teens or early twenties: it was the first financial product you ever owned and you have stuck with it over the years, tolerating occasional lapses in good service, awkward opening hours and bad-tempered letters nagging about overdrafts.

But now you have found a new bank: a bank that gives you one-to-one attention, more frequent statements and a marginally better interest rate; a bank that knows how to satisfy its customers; a bank that remembers your name and spells it right. Once you have asked your employer to credit your salary to your new account, the next step is to transfer all your direct debits and standing orders from one bank to another. Simple.

Except for one problem. Direct debits are an easy way to pay utility bills, insurance premiums and various subscriptions and a convenient way to spread repayments on consumer loans. They're so easy and convenient, we tend to forget about them once they're up and running.

So when the time to abandon our first bank arrives, recalling the details of the whole spectrum of balance-slashing agreements to which we have signed our names and then transferring each one to our new bank can be a painful and messy experience.

Meanwhile, what does your soon-to-be-ex bank do? It tries to cling onto your relationship, making it difficult for you to strike up new custom with a rival bank and put the memory of its bad service behind you.

The way it does this is to distance itself from the whole business of direct debits: nothing to do with us, it says.

Direct debits are an agreement between the customer and the company collecting the direct debit, for example ESB, Eircom, Bord Gais, NTL. "The bank just facilitates and processes the payment," says a spokesman for AIB. If a customer changes bank, they must complete and sign a new agreement form with the originating company, and any customer transferring out of AIB will be advised to contact the companies to arrange this, he says.

"It's the customer's responsibility to move direct debits. No one else can authorise withdrawals from your account," confirms a spokeswoman for Bank of Ireland. "People like to move accounts and have everything set up the next day. That's not possible, because of the amount of form filling that needs to take place."

In the UK, banks have cut the amount of form filling by introducing an automated system for transferring direct debits and standing orders. Launched in November 2001 following pressure from consumer watchdogs, the service removes the need to complete new forms for the estimated 900,000 consumers who switch current accounts every year.

The new bank manages the process once customers give them details of the old account and authorisation to act on their behalf. The new bank contacts the old bank to obtain details of all debit directs and standing orders held against your old account. The old bank must provide the new bank with a list of all direct debits and standing orders within five working days.

The new bank then gives organisations collecting direct debits from your account the new bank details and advises the old bank of which direct debits and standing orders it needs to cancel. Some even offer customers an interest-free overdraft during the switch.

In Ireland there are no similar industry initiatives in the pipeline, according to the Irish Bankers Federation (IBF), despite the popularity of direct debits. Some 83 million were processed through AIB, Bank of Ireland, National Irish Bank, Permanent TSB and Ulster Bank in 2001, compared to 63 million credit card transactions and 43 million Laser card transactions during the same period.

However, not all banks concentrate on making it difficult for customers to leave. First Active, for example, offers a direct debit and standing order handling service called Easy Switch in a bid to attract customers to its current account mortgage.

In terms of standard current accounts, Ulster Bank consistently makes fresh marketing efforts to win customers to its U First current account. Ulster Bank takes a different approach to direct debits than the Republic's two biggest banks, saying it will assist new customers in obtaining new direct debit mandates from third parties.

"With new customers coming to us, we want to make it as easy as possible," says a spokesman. The bank will also provide customers who are leaving the bank with a list of their direct debits, he adds. "Customers leaving us is a rare thing, but when it does happen, it's clearly not in our interest to hold things up," says the spokesman.

Unlike the UK, there is no time limit on when banks must cancel or set up new agreements, but it may be worth it for departing customers to specify an exact timeframe. Permanent TSB, for example, says it carries out the process according to the deadline requested by the customer.

However, as the new banks have to wait for the company collecting the direct debit to forward the changed mandates to them before it can set up a direct debit, delays and hiccups such as double payments or missed payments are commonly blamed on the collecting companies. "It is a bit of a roundabout," admits the spokesman for AIB.

Careful planning and a period of overlap between accounts will give switching customers fewer headaches. National Irish Bank says it advises customers to set up new accounts and obtain debit and ATM cards for that account before they close their NIB account.

"They should then move their direct debits on a case-by-case basis. If they want to close their account just a few days before a direct debit is due, we would advise that they wait a few days," says a spokeswoman.

Otherwise, the company collecting the direct debit will try to obtain money from a closed or empty account. This can be "a bit of a palaver", says the NIB spokeswoman. It can also be quite expensive for consumers. If they miss a payment, the collecting company may charge a fee for late payment or extra interest if the direct debit is to repay a loan.

Although banks say direct debits are not their responsibility when it comes to switching banks, they do make money from a number of charges connected to their operation. Most have a set-up charge, a small charge per each transaction, a charge if the direct debit fails due to insufficient funds and a charge if the debiting of the payment plunges the account balance into an unauthorised overdraft.

For example, AIB charges €4.44 for each item presented for payment on your account that results in an unauthorised overdraft, subject to a maximum of five items, or €22.20 a day. It charges €6.35 per item if direct debits are returned unpaid.

As a result, a customer switching out of AIB runs the risk of incurring these charges if either the collecting companies or the banks get their timing wrong. They will then face a whole raft of set-up charges per direct debit at their new bank. A customer with 10 direct debits moving to Permanent TSB will pay a total of €50, for instance.

Most people never switch their current accounts. A report on customer satisfaction by Excellence Ireland found that nearly a third of bank customers would not switch their current account to another bank for a reduction in charges or fees, presumably because they feel the minor savings on offer elsewhere simply aren't worth the hassle and cost of switching. A recent report by Davy Stockbrokers, compiled by analysts Mr Scott Rankin and Ms Emer Lang, says AIB and Bank of Ireland's dominance of the current account market may the focus of the Competition Authority's ongoing study of the banking sector.

The report suggests improving portability as one measure to reduce current levels of consumer inertia.