Direct Debit Processing | lessons from Stroud District Council

Direct debit offers a secure and convenient method of making regular payments, a system that works for both customer and supplier. As with any system, very occasionally things don’t go to plan. Stroud District Council discovered this over Christmas 2016. In this blog, we look at what went wrong for their direct debit processing, how they put it right, and the lessons that can be learned for everyone running direct debit payments.

Stroud District Council’s Direct Debit Processing Error

Residents in Stroud who were due to pay their council tax by direct debit on 28th December 2016 found that the payments had already been taken from bank accounts before Christmas. The Council also realised that payments due to go out on 1st January 2017 had been set up to be taken on 28th December.

The Council rectified the issue with the January 1st payments by crediting the affected accounts on 27th December. This ensured that those customers had sufficient funds to cover the payments that would be collected in error on 28th December. With the error effectively cancelled out, the proper payments were then taken on 3rd January as they should always have been. In addition to the administrative burden of rectifying the situation, the Council were liable for bank charges that customers incurred as a result of the payments being taken early.

How could this error occur?

When you are processing direct debits and want a future-dated collection to occur, it is up to the service user to include information in the file submitted to BACS as to the processing or payment date.  If no future date is stipulated, BACS will default to the next available collection date.  In this case, we can only imagine that in the run up to the holiday period, something went wrong within the Council’s organisation which meant that no dates or incorrect dates were included in the files that were lodged with BACS. It’s not that uncommon for errors to occur around bank holidays, when there may be more non-processing days than usual.

5 ‘lessons learned’ for your Direct Debit Processing operation

Check processing dates

If a holiday period is coming up check the BACS direct debit processing calendar which details ‘non-processing days’ and helps you make sure direct debits are submitted in time.

The fact that this error occurred over the Christmas period is not uncommon – with a number of bank holidays in the mix, organisations using direct debit solutions to manage regular payments need to be extra vigilant.

Check BACS files include the correct direct debit processing dates

BACS and the banks process direct debit payments based on the instructions provided by the originating organisation – so if your files specify the wrong processing date and the money is taken early, this is your responsibility.

Have an emergency back up plan in place

Once you have a direct debit system up and running and everything is going smoothly, it can be easy to become complacent. After all, when it’s all running smoothly (as it usually does) there’s no need to worry. The problem is that when things do occasionally go wrong, it will be much easier to put things right if you have thought through possible problems and made an emergency back up plan.

Be upfront and honest with your customers

A one off payment error is embarrassing and uncomfortable but should not cause lasting damage to your customer relationships provided it is handled correctly. In this case, Stroud identified the problem (presumably their customers made the error known fairly swiftly), and dealt with it. They checked for other errors – which resulted in them spotting the issue with payments due on 1st January, and put steps in place to rectify this error too. They also kept customers updated and issued an apology.

Make sure your staff are up to date

It’s really important that all staff involved in processing your direct debit payments are fully up to speed with how direct debit works, the procedures involved and any changes that come into force. We’ve just seen the release of the latest BACS rules, and there are plenty of changes to take into account. Investing in direct debit training for your staff is a wise step to take to keep your direct debit system running smoothly.