Direct Debit, Direct Debit Training and Consultancy
Indemnity Claims, Training
16, JAN 2020

Article by Sarah Cottee, Training Manager.

Collecting funds via Direct Debits offer 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 like card, cheque or cash. One aspect of this is the Direct Debit Guarantee where customers can claim money back if an error is made. As a Service User it can be frustrating when an indemnity claim is raised however, but what should you do if you get an Indemnity Claim?

We help lots of organisations deal with Indemnity claims. Please see answers below to common questions we receive from Service Users:

What is an Indemnity Claim?

It is a claim made by the paying bank in respect of an incorrect Direct Debit being applied to a payers account. Remember an Indemnity claim is only a challenge of the payment method i.e the Direct Debit. You will still have a valid contract and therefore the payer still owes you the money.

What is the Indemnity Claim process? What usually happens?

-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 check the reason given is “Valid” and falls under one of the eight valid indemnity claim reasons
-If it is a valid reason the Bank will give the payer a full and immediate refund
-Bank will then raise an indemnity claim which service users will be informed of via a DDIC report
-Once the service user receive the report they have 9 days to challenge the claim – only if you have the relevant proof
-After 14 working days if the bank hear nothing from you or if your challenge was not successful then the bank will automatically take the money out of your account.

How many Indemnity Claims are normal?

This is a hard question to answer as it is always different for every organisation and the industry you are in. Are you getting a lot of Indemnity Claims? Have your number of claims increased? Are they often for the same reason codes? If you answered yes to any of these 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 customers 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 payers raises an indemnity claim with their bank even though you have already given them a refund). So any customers contacting you regarding refunds it is advised you may want to consider sending them to their bank to raise an indemnity claim if there has been a genuine mistake.

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