ID checking for customers signing up for Direct Debits

ID checking is required for any organisation using Paperless Direct Debit (PDD) sign up. The Service User’s Guide and Rules to the Direct Debit Scheme (Section 16.3) states: “Prior to the origination of any Direct Debits the Service User must verify the identity of the Payer and his address, and ensure that the account details provided relate to the Payer.” But how do you do this?

Direct Debit originator ID

The Rules suggest a number of different possible approaches to ID checking, including:

– using historical data for existing customers

– using a selection of registers such as the electoral roll, postcode lists or credit rating lists for new customers. It goes on to advise that these are available from local councils, the Royal Mail or other suppliers

So, for existing customers it seems simple enough: we can confirm their name and address by asking them a couple of security questions. But how do we check that their bank details belong to them?

Without Direct Debit User ID

Direct Debit originator ID search

For new customers, it gets a bit harder. First of all, we have to check their identity. Well, the electoral roll and Post Office address lists can tell us if someone exists with the name the customer has given. They will also tell us if the address given exists, but is this really confirming the individual’s identity? Can we guarantee that the individual signing up is the person they claim to be? Maybe not, but the Direct Debit Rules suggest that these are acceptable sources and should be good enough for an ID check. We are, of course, still stuck with confirming that the bank details belong to the individual, and that is a lot harder.

To check someone owns their bank details is virtually impossible without seeing a copy of photo ID and checking the likeness in person before confirming the bank details against a cheque book, bank statement or similar. Well, by the time that has been done, it would probably have been easier to get them to fill out a paper form where the rule doesn’t apply.

There are a couple of services out there (provided by CallCredit and Experian) that get fairly close to checking bank details. In some cases, they can use credit reference data to check that the bank details actually belong to the individual but neither company has a complete set of data and the services can be pretty expensive to use. There are also likely to be a number of results that can’t be checked … and then you are back to square one. So, do we then accept the customer or not?

Paperless Direct Debit has huge advantages for any organisation that is signing up large volumes of Payers but compliance with the rules is virtually impossible to achieve, so what can you do?

Well, the answer seems to be … the best you can. From our conversations with people in the banking industry and even sources close to Bacs it seems as though it is generally recognised that it is not a perfect system. When you apply for Paperless Direct Debit you will have to say what you feel you are able to do and then see if this is sufficient from your sponsoring bank’s point of view. Ultimately the bank has to make the decision as to whether they will allow you to use Paperless sign-up methods.

with Direct Debit user ID

If you require further information or help with user ID checking, Paperless Direct Debit applications, compliance and best practice then please contact us.

We also offer Bacs Accredited Training or Consultancy to enable you and your staff to be confident your Direct Debit Scheme – including Direct Debit user ID checking – is operating effectively to serve you and your customers.