Frequently Asked Direct Debit Questions

Since the start of March the number of Direct Debit questions we have received from Service Users has increased considerably. The disruption brought by the COVID-19 lockdown and associated changes to working environments and processes has resulted in uncertainty – and even panic – for some with confidence in their Direct Debit knowledge going out the window!

As experts in Direct Debits we would like to assist you in any way we can and to that end, please see below answers to common Direct Debit questions we have received time and time again.

How long should I keep a paper Direct Debit Instruction for?

A paper Direct Debit Instruction (DDI) can be retained as proof that authority has been given by the payer for you (the Service User) to collect the Direct Debit. For this reason, a Service User might decide to keep the DDI for at least as long as the contract exists – whether this is one year or twenty years! Unlike other payment methods however, the Direct Debit is covered by the Direct Debit Guarantee. This means that a payer could decide to claim back their money at any time and the DDI could therefore be required as proof in a counterclaim – at any time! Service users may therefore decide to keep the DDI for longer still. Don’t forget, you are allowed to keep scanned copies of DDi’s so long as they are full sized and easy to read, so you don’t need to worry about keeping filing cabinets full of paper. Think about the trees!

Can we set up a Direct Debit instruction via email?

No, not by just taking the customers bank details in an email. You could potentially accept a scanned and signed paper Direct Debit Instruction in an e mail. Paperless signups are usually accepted via the telephone or through online web signup but these use a script/web-pages approved by your sponsoring bank. Depending on your industry and audience, online web signups can be highly effective as these can be completed from anywhere, at any time, without any immediate active input needed from the organisation. If you would like to know more about moving to paperless – please see our recent blog on this topic.

What information should an advance notice contain?

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. Advance Notice should also be given when any changes are made e.g. to the amount / collection date or frequency of the Direct Debit collection. In addition, Advance Notice may be required if the reference or Service User’s contact information has changed.An Advance Notice must always contain the following details:

• Direct Debit Reference
• Amount to be debited
• Collection Date (date, month and year)
• Frequency (e.g. if you set your payer up on a payment plan and collect the same amount each month then you must include the frequency)
• Service User Contact Details – so the payer can contact you with any queries – this can include telephone number and/ or email address.

Can I issue a refund if I have collected a DD in error?

Thanks to the Direct Debit Guarantee there is no need to issue a refund in any situation. Rather than issuing a refund the individual or organisation that you have collected the funds from can submit an indemnity claim to their bank. Their bank will issue an immediate refund and then claim the funds back from your organisation. This ensures no double refunds are processed and that there is an official audit trail held with the bank. If your customer is unwilling to raise an indemnity you can do this on their behalf by contacting their bank for them.

A Direct Debit collection failed but the payer has said I should try to take the DD again – can I?

There are a number of reasons why collections fail. The ARUDD report uses reason codes to help you identify why a payment has failed. Understanding these reports enables you to take appropriate action. If a customer would like you to try and collect again/represent the collection then you need to understand the reason that it failed. Once you have understood the reason for the failure you can represent the collection with permission of the payer.

A payer has cancelled their DDI but now wants to reinstate it. Can I do this? How?

The scheme does allow the reinstatement of a Direct Debit. The rule is that the Service User must have the ‘payers’ consent to do so and can only be used in the case of the cancellation of the Direct Debit being prompted by the ‘payer’. Reinstatement is not permitted where the DDI has been cancelled by the paying bank.

What do I do if I receive an ADDACS report with a change of bank details? Do I need to contact the customer?

The Direct Debit scheme provides important advice for Services Users on Amendments and Cancellations to direct debits. The advice is titled an ADDACS report (Automated Direct Debit Amendments & Cancellation Service). The ADDACS, (along with the AUDDIS and ARUDD) must be actioned within 3 days of being made available to the Service User. The new details should be provided in the report in which case you can update your system from there. Updating the details will ensure that you do not receive future ADDACS reports for that customer. However, if you receive an ADDACS report with reason code three and no new details provided you will need to contact the customer for their updated details.

Why do I get an unpaid report with ‘No Instruction’ when I am sending AUDDIS transactions?

Whatever the situation is, the code “No Instruction” shouldn’t really be coming back to you if you are using AUDDIS. The error is likely to be entirely controllable in your own environment. There are two possible answers. Either you are not using the AUDDIS system to set up your Direct Debits, or you are using AUDDIS but it appears not to be working for you correctly. If the reason is simply that you are not using the AUDDIS system then one resolution is to implement AUDDIS. But if you are using AUDDIS but it isn’t working correctly for you, here are some things that could be going on:

• Do you have a process ensuring you receive all your reports from Bacs? If you’re not getting all your AUDDIS reports then you won’t always know when instructions haven’t been accepted by the bank.
• Do you always action your AUDDIS reports promptly? Leaving time between receiving your AUDDIS reports and updating your system’s details could be causing the problem.
• Do you always action your ADDACS reports and are you sending the correct codes back to Bacs where necessary? A common mistake is not updating your own system with new bank details or failing to send the correct AUDDIS codes to the new bank when someone transfers their account. (You need to send a 0N code for it to be set up correctly) Try the suggestions above or alternatively we can help with our Training, Consultancy and Audit services and help to eliminate unnecessary errors for you.
• Did you leave enough time for the DDI to lodge before trying to collect? Don’t forget the three-day processing rule. Day one is when you submit the instruction, day two is when its processed and day three is when it reaches completion. You need to wait for the AUDDIS instruction to be processed before you can try and collect. If you don’t Bacs won’t recognise that you have permission to use the details that you are trying to submit.

Still unsure? Have more Direct Debit Questions? It may be time to consider attending Direct Debit Scheme Training where all these topics are covered in detail. Please see our website for further details about all our training options including regional, onsite or online training. If there is anything else we can assist with, please feel free to contact the team, we are always happy to help: info@cleardirectdebit.co.uk / 01737 826957.