Direct Debit Indemnity Claims – What do you need to know?

Article by Sarah Cottee, Training Manager.

What is Direct Debit Indemnity?

The Direct Debit Indemnity scheme allows Payers to reclaim Direct Debits taken without authorisation. This might be because, for example, the wrong amount was taken, payment was taken on the wrong date, or the required Advance Notice wasn’t given.

Direct Debit Indemnity Claims

Collecting funds via Direct Debit offers organisations numerous advantages – cheaper to process, more control, and longer customer relationships being just a few. One of the top benefits for Payers is that Direct Debits offer them greater protection compared with some other payment types, such as credit or debit card, cheque or cash. One aspect of this is the Direct Debit Guarantee where customers can claim money back immediately via their bank if a collection error is made. As a Service User it can be frustrating when an Indemnity Claim is raised … So what should you do if you get an Indemnity Claim?

As a Bacs Accredited Training Provider and Direct Debit Consultancy, we have years of experience in helping organisations deal with Indemnity Claims. Here are answers to some common questions we receive from Service Users:

What is a Direct Debit Indemnity Claim?

It is a claim made by the paying bank in respect of an incorrect Direct Debit collection applied to a Payer’s account. Remember, an Indemnity Claim is only a challenge of the payment collection method – that is, the Direct Debit. You will likely still have a valid contract with your customer, and therefore the Payer still owes you the money.

What is the Indemnity Claim process? What usually happens? How long does a Direct Debit Indemnity take?

– Payer notices a mistake on the Direct Debit that has been collected
– Payer goes to their bank – quoting they are covered by the Direct Debit Guarantee
– Bank checks the reason given falls under one of the 8 valid Indemnity Claim reasons
– If it is a valid reason, the bank will give the Payer a full and immediate refund of the disputed payment
– Bank will then raise an Indemnity Claim, which Service Users are informed of via a DDICA report
– Once the Service User receives the report, it has 9 days to challenge the claim – but only if it has the relevant proof
– After 14 working days, if the bank hears nothing from the Service User or if their challenge was not successful, then the bank will automatically take the money out of the Service User’s account

Are false Direct Debit Indemnity Claims a problem?

We can’t promise people won’t make them, but the claims process is robust and should eliminate false claims. In most cases, the contract between you and the customer remains valid, so you can still pursue payment.

How far back can you claim Direct Debit Indemnity?

There’s no time limit on when claims can be made against a disputed payment.

How many Indemnity Claims are normal?

This is a hard question to answer as it is different for every organisation and can also depend on the industry you are in. Are you getting a lot of Indemnity Claims? Has your number of claims increased? Are they often for the same reason codes? If you answered yes to any of those questions then it may be time to review your processes. Remember, if you manage an efficient and compliant scheme you shouldn’t receive any Indemnity Claims.

If you need assistance with Indemnity Claims please feel free to contact us as you may benefit from a processes review; please see our website for further details.

Is a Direct Debit Cancelled if there is an Indemnity Claim?

If a Payer has raised an Indemnity Claim, the Direct Debit may not necessarily have been cancelled so it is always worth checking if it has been cancelled on your ADDACS report. If not, you can continue to collect – if you contact the customer and they agree for you to do so.

Should we refund Direct Debits?

Did you know you can raise an indemnity on your customer’s behalf? This should be considered rather than giving a direct refund to a Payer. When you give direct refunds you run the risk of a double refund (i.e. the Payer raises an Indemnity Claim with their bank, even though you have already given them a refund). So, for any customers contacting you regarding refunds, it is advised that you consider sending them to their bank to raise an Indemnity Claim if there has been a genuine mistake.

How Clear Direct Debit can help

If you have any questions or there is anything you are unsure about regarding Direct Debit Indemnity Claims please contact us and we can give specific advice and support. Call us on 01737 826957 or email us on info@cleardirectdebit.co.uk.

For any other information and guidance regarding Direct Debits, we offer Bacs Accredited Training, as well as a Direct Debit Consultancy service to enable you to review and refresh your knowledge and processes and ensure your Direct Debit Collection Scheme is compliant, efficient and effective. If you have any questions, please don’t hesitate to get in touch.