ADDACS, ADDACS reports, Bacs, Direct Debit, penalties
17, JAN 2018

It’s no secret that the Bacs scheme is underpinned by a complex set of rules. These are in place to maintain the integrity of the system. The rules keep the system running smoothly, benefiting service users and their customers, so staying compliant has to be a priority. In this blog, we focus on the ADDACS reports and how to make the most of them in order to keep your direct debits well managed, and to remain compliant with the Bacs scheme.

What is the Automated Direct Debit Amendment and Cancellation Service?

The Automated Direct Debit Amendment and Cancellation Service is the mechanism through which Service Users are informed if any direct debit instructions have been amended or cancelled. It’s usually known by its acronym ‘ADDACS’.

The Direct Debit Guarantee gives your customers the right to cancel a Direct Debit Instruction. They won’t always get in touch with you to do this – they may go direct to their bank. With the popularity and simplicity of online banking, it’s very easy for a customer to manage their direct debits in this way. Another common scenario is when the customer switches bank using the Current Account Switch Service. If they don’t get in touch with you, the ADDACs report may be the first indication that anything has changed.

How do I receive ADDACS reports?

You can receive ADDACS updates in either .html or .xml format. Service users can log in to the payment services website with a smart card or log in details and down load the reports in either format. You can also download xml reports straight into your Bacs software which links to payment services. This is usually done with a smart card.

If you download the .xml version of the report, you can then import it into your Bacs software, or, as we’ve mentioned, you can choose to download it directly into the Bacs software. Downloading the .xml version of your ADDACS report directly into your Bacs software means you receive the information in a consolidated and consistent way. This avoids errors that can arise from manual input. You also avoid the administrative costs of manually inputting the data or printing reports. The .html version is easy for you to view, but remember that you will need to input the information into your Bacs software to update your records.

The benefits of actioning your ADDACs reports

One of the key benefits of accessing and actioning your ADDACs reports regularly is that by keeping your customer records up to date, you will reduce the number of failed transactions. You can also improve your customer service by adapting your system to generate standard letters relating to the different ‘reason’ codes that appear in the reports. This means you will keep your customers up to date more effectively.

If you choose to use a bureau, such as Clear Direct Debit, your bureau can access your ADDACs reports and make them available to you via a secure channel such as the SFTP.

How does it work?

Once your customer has advised his or her bank of any change, you will have this information on Day 2 – the day after the bank has inputted the information. ADDACS validates every advice, stores the amendments and cancellations, and advises you, the Service User, electronically via the report system.

How important is it that I action this information?

From a compliance perspective, it’s vital that you act on the information in the ADDACS report within 3 working days. You need to be logging in to the system regularly to make sure you are up to date and can act promptly to stay compliant.

What are the penalties for failing to respond to your ADDACS reports?

As a service user, one of the key risks comes from being non-compliant with the Bacs scheme rules. As we’ve mentioned, you need to action the information in your ADDACS reports within 3 working days. Failing to do so means you are not complying.

In addition, if you do not keep on top of the up to date information about your direct debits, you risk an increase in the number of direct debits returned as unpaid, and could experience increased indemnity claims. Bacs will follow up with service users that repeatedly fail to action their ADDACs reports – we do know of one organisation where this has happened. Ultimately, you might be asked to leave the Bacs scheme.

The real penalty, though, is the time and administrative effort you will need to put in to reconciling your systems, and chasing for payments when they don’t come in without knowing why this is. This can be a big hit for any organisation and can impact on customer service.