Direct Debit Advance Notice

Providing Advance Notice is a key cornerstone of the Direct Debit Scheme and an important responsibility for the Service User. Failure to comply with scheme rules regarding Advance notice could result in failed collections and refunds (e.g. if the payer doesn’t have sufficient funds in their account or disputes the payment as 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 so its important to get it right!

To help ensure successful collections and a smooth Direct Debit scheme, we have listed below 6 common questions we are asked about Direct Debit Advance Notices.

1. What is ‘Advance Notice’?

Advance Notice is the method by which the service user gives notice to the payer (the person paying the Direct Debit), before the Direct Debit is collected or when any changes are made to the amount / collection date or frequency of the Direct Debit collection. Also in some cases if the reference or Service User’s contact information has changed.

2. Who should receive the Advance Notice?

The Advance Notice must be issued to the person who signed the Direct Debit Instruction (the payer). This is the person who has the authority to authorise Direct Debits to be collected from the bank account. Most of the time this will also be your customer but not always. If you are a Student Housing Organisation for example, your customer may be the student renting a flat but the payer may be their parent who pays the bill!

3. What information should an Advance Notice Contain?

An Advance Notice must always contain the following details:

• Direct Debit Reference
  
• Amount to be debited. Note: if the amount is an amalgamation of more than one collection, the amount of each collection forming part of the Direct Debit must also be shown
• Collection Date (date, month and year)
• Frequency (e.g. if this is a one-off or a schedule of payments)
• Service User contact details – so the payer can contact you with a query. If this is not present the payer may be simply cancel the Direct Debit with the bank
• Details of the advance notice period (must be on an initial advance notification / subsequent notifications).
• Service User Number (SUN) (optional).

4. How do I give Advance Notice?

The Advance Notice can be provided in written form, electronic form or given orally. Whatever form is used, the information must be clear and easily identified by the Payer, (it shouldn’t therefore contain marketing / sales material), and it should be approved in advance by your sponsoring bank.  Forms can include:

• Written – e.g. a letter addressed to the Payer; Invoice; Statement; Within a Contract. (These would usually contain a statement such as, “This is for information purposes only. The amount due will be collected by Direct Debit on or immediately after …”)
• Electronic – (with prior agreement of payer), e.g. by email; via a secure website – in a durable medium e.g. an invoice which allows the payer to store and access the information and reproduce it unchanged. The payer can then be e mailed / texted etc to advise that the information is available on the website or via SMS (text message). This may be more suitable for some types of organisation – e.g. mobile phone providers who are collecting for a top-up and/or organisations who have already provided a written Advance Notice.
• Orally – usually on an ad hoc basis. This isn’t suitable for providing a schedule of collections. Note: Transcripts of calls aren’t accepted by the bank as proof of Advance Notice being given but they can be useful for any future discussions with the payer. Service users may also provide advance notice to blind or visually impaired payers on CD / Cassette.

Remember: Proof that advance notice has been issued does not provide proof that the payer has received it! If you hold incorrect address or e mail details for example or if the payer is different from your customer, the correct person may have never received the information – just one of many reasons why its important to keep payer details up to date!

5. How much Advance Notice do I have to provide?

Advance Notice must be provided to the payer before any collections are taken from an account and the length of the advance notice depends on what has been agreed with the sponsoring bank. If you are unsure what time period your organisation has, you can check the information contained within your Direct Debit Guarantee as it has to state this time period.

Typically, the default period (the time allowed for receipt of the advance notice by the payer) is a minimum of 10 working days plus postal time.  If your organisation has not requested anything different you will typically be required to give 10 days. It is possible however to request a shorter time period from your sponsoring bank – for example 3 working days.  If this is agreed your Direct Debit Guarantee should reflect this and you would be required to provide 3 working days plus postal time.

6. If I don’t collect on time, should I provide a new Advance Notice?

The Direct Debit Rules state that Direct Debits must never be collected early and should be taken on or within 3 working days after the date advised to the payer. Sometimes it is not possible to collect a Direct Debit when planned. Software failures, unexpected staffing absence or database issues could all affect an organisations ability to transmit their files to Bacs. This should be avoided if possible and its why its good practice to have a Bureau on contingency standby for emergencies even if you have your own software. Read more about this service on our website.

If your organisation fails to collect the Direct Debit as advised to the payer, you could collect it at a later date. Where this is more than 3 working days after the originally advised date, then you will need to provide Advance Notice again. If the date is amended then you must remember to allow the full advance notification period – unless you agree differently with the payer.

Any more questions?

If you have any questions about this information – or about any of the other rules relating to Advance Notice – please contact us and we will be happy to help. If you are interested in learning more about the Direct Debit Scheme – see our website for details about Direct Debit Training.