Increases in Cancelled Direct Debits? Recent FAQs

Blog by Sarah Cottee, Training Manager

We understand that the recent news and uncertainty surrounding the COVID-19 situation has, for some organisations, caused an increase in the number of cancelled Direct Debits they are experiencing. Is your organisation suffering? Are you unsure what to do next? How can you stop payers from cancelling?

What should I do if I receive an “instruction cancelled” notification?

If a payer cancels a Direct Debit with their bank without advising you that they have done so, you will receive notification on an ADDACS report (Automated Amendment & Cancellation report). Service users must liaise with the payer to agree the payment method for the collection of any outstanding balance. Remember, the ability to cancel is a vital part of the Direct Debit Guarantee which supports customer confidence in the Direct Debit scheme. However, it can cause issues for you as a Service User if the customer has not also advised you of the cancellation, so it’s worth making sure your organisation keeps on top of all reports on a regular basis. The Bacs rules recommend that Bacs reports are checked as a minimum every three working days, however at the moment it may be worth considering checking your reports more frequently – i.e. every day or every other day. This will help you keep on top of all the changes and to make sure you can get in touch with the payer to rectify the situation asap.

The Payer has cancelled the Direct Debit by mistake – do they have to complete a new instruction?

If the payer has cancelled the DIrect Debit by mistake then they can re-instate the Direct Debit, they just need to get in touch with their bank to authorise the re-instatement . Once this has happened you will usually be notified of this with a reason code R on your ADDACS report. You may re-instate a cancelled Direct Debit Instruction up to two months from cancellation. This means that you may resume Direct Debiting under the re-instated instruction, however a new DDI must be obtained and lodged if the re-instatement is identified after the two month period.

We are suspending our Direct Debits – Do we have to notify the payer?

Due to government restrictions some service users have been forced to temporarily close their doors especially in the leisure industry. A lot of these organisations have decided to suspend their Direct Debit collections whilst they are closed. The scheme rules don’t mention that you must inform a payer if you are suspending a collection, however they do say that you must notify payers if you are changing the collection amount or frequency.

At the moment with so much uncertainty, our best advice is to consider your customer service levels – help them out! You may want to consider sending them a notification of the change. This can also work in your favour because it may stop them from going ahead and cancelling the direct debit because they are unsure of what is happening. You could send them an email or even put a statement on your website e.g. “No need to cancel your Direct Debit – we are suspending all Direct Debit collections until the gym is back open!”

Should we stop the payers service if they cancel?

If a payer cancels their Direct Debit but wishes to continue receiving the services you provide, they must set up an alternative payment arrangement. In many cases where the payer threatens to cancel the Direct Debit, it may be possible to resolve the issue to everyone’s satisfaction, by addressing the customer’s concerns. Customer service is key at a time like this so try and stay in touch with payers. They need to feel reassured that you have not forgotten about them. Payers have worries and concerns at the moment just like you do. If you can reassure them and leave the Direct Debit in place it will make it easier to predict your income going forward.

Remember if a payer advises you that they wish to cancel their Direct Debit and you fail to do so, you may potentially be subject to an indemnity claim – a refund under the Direct Debit Guarantee which you want to avoid.If you do find that your Indemnity claims increase, please contact us for further help and advice and check out our FAQs page where we will post more information over the coming days.

If you have any questions about issues arising from the cancellation of Direct Debits, get in touch – we’re a BACS accredited Direct Debit training provider and a Bacs Approved Bureau and we are happy to help!