The Direct Debit Guarantee: What Does it Really Mean?

The Direct Debit Guarantee is one of the main reasons that the Direct Debit Scheme has been so successful. But what actually is it?

What is the Direct Debit Guarantee?

The Direct Debit Guarantee offers protection should there be an error in the payment of a Direct Debit. That could mean, for example, that the wrong amount was taken, or a payment was taken on the wrong date. It applies to all Direct Debits, and there is no time limit on making a claim.

The Direct Debit Guarantee offers reassurance to both the Payer and the Service User. Responsibility for managing the scheme sits with both the Service User and the Payer’s bank or building society. Let’s take a closer look.

Reassurance for the Payer

The Direct Debit Guarantee protects the Payer from any errors, whether made by the bank/building society or the Service User (that’s the organisation collecting the Direct Debit). If an error is made in the amount collected or the date of the collection, the Payer can request that the bank/building society provide a full and immediate refund of the money taken. Usually, that money will reappear in the Payer’s account within 2 hours. The Guarantee also confirms to a Payer that they may cancel a Direct Debit at any time.

Responsibilities assigned

Banks/Building Societies:

It is the Payer’s bank or building society that actually provides the Guarantee to the Payer – not the Service User’s bank/building society. If a Payer requests a refund, therefore, their bank will provide it and then take the money back from the Service User.

Service Users:

Service Users must:

• Provide the Payer with a copy of the Direct Debit Guarantee BEFORE any Direct Debit payment is collected from the Payer’s account. This is typically provided at the time of initial sign-up and is often included on the Direct Debit Instruction – though it can be provided after initial sign-up, i.e. in a confirmation letter to the Payer.
• Provide the Guarantee in English – or in a bi-lingual Welsh format.
• Use only the approved version of the Guarantee – Service Users should check that they are using the correct version of the Direct Debit Guarantee.

Reassurance for the Service User

Whilst the bank will refund any money under the Direct Debit Guarantee that the Payer believes has been collected in error, this refund relates solely to the Direct Debit. If a Payer has entered into a contract with an organisation for the receipt of goods or services, then this contract is still valid and is unaffected by the refund of the Direct Debit. Payment is still due and the Service User is entitled to approach a Payer and request payment by other means. The Guarantee also states that any refund received by a Payer that they are not entitled to must be paid back when the organisation requests it.

Do you have any questions?

Do you have questions about your responsibilities under the Direct Debit Guarantee? If so, please contact us to discuss these further.

We are a Bacs Accredited Training Provider – click here for details of our Direct Debit training courses and modules.