Categories
Bacs, Direct Debit, Uncategorized
Date
12, FEB 2016

We’ve been asked about the new prohibited practice for Direct Debit Advance Notice and what it means.

The rules on Advance Notice have been clarified in the latest version of the Service User Guide & Rules to the Direct Debit Scheme which were updated in January 2016 – in particular in relation to Advance Notice being provided following Paperless Direct Debit sign-up.   The change means that it is now a prohibited practice to issue Advance Notice via a website without the Service User advising the customer (payer) that the Advance Notice is available.  This should also be written advice.

With the internet now holding its own as the platform of choice for many businesses, it was only natural that the Direct Debit scheme allowed for Advance Notice to be issued electronically, including via text and websites. An example of issuing Advance Notice on the web would be if your business provides online account access. Advance Notice can be issued through that account following the successful sign-up of a new Direct Debit customer.  Prior to issuing the Advance Notice, the Payer must be told of how they will receive the notice – for example by advising the payer during the sign up process that Statements / letters will be made available on the online account.  Each time Advance Notice is provided on the online account, the payer must be informed of its availability in line with the agreed notification period.

Advance Notice is a key cornerstone of the Direct Debit Scheme and the sole responsibility of the Service User, (the organisation collecting the Direct Debit). The Service User must inform the Payer (customer) of what is going to be collected and when.   This must be before the first collection and again if there is a change to the Direct Debit amount / timing.  The default notice period is 10 working days but this can be lengthened / shortened in agreement with your sponsoring bank.  Failure to comply with scheme rules re Advance Notice could result in failed collections and refunds – for example if the payer does not have sufficient funds in the Account or disputes the payment on the basis they were not expecting it.   In both these examples, there could be a serious impact upon customer relations as well as upon organisational cash flow.

The rules on Advance Notice go further stating that Advance Notice must always contain details of:

  • Direct Debit Reference
  • Collection Amount,
  • Collection Date
  • Frequency or Schedule or payments
  • Service User Contact details

The scheme allows the notice to be delivered in paper and electronic forms, including:

  • Letter
  • Invoice
  • Statement
  • Email
  • Online

The Service User must seek approval of their Advance Notification template from their Sponsoring Bank before issuing it to its customers.

Advance Notice – what’s that? See our website for more on this topic

Scheme Training – for more on this topic and to book our Accredited Direct Debit Scheme Training , see our up and coming regional courses or click here.