The Direct Debit Instruction

The Direct Debit Set-up

The Direct Debit Instruction (DDI) is the method by which service users obtain the payer’s authority to debit his account. It is important that the DDI provides all the necessary information to enable collection by direct debit and that the payer s provided with a clear understaning that they have given thier authority for the servivce user to debit their acccount.

The various DDI’s available, all of which are in standard formats making it easier for the payer to complete and ensre that all the necessary informaion is captured.

The design of all DDI’s must be approved in writing by your sponsoring bank beofre the DDI’s can be issued to your customers. You shouldnt have any information on the reverse of the form that might be mistaken for being part of the instruction. Any additions, use id the reverse, or changes to the format must have written approval from the service user’s sponsoring bank.

Direct Debit Guarantee

The Direct Debit Guarantee wording was last updated in July 2009, replacing both previous versions of the guarantee. All service user’s must use this version of the Guarantee and only this version. It is not permitted or Service Users to vary the wording in any way, only to insert into the Guarantee, the relevant details that relate specifically to the organisation. These are: Company Name and Number of days advance notice that is given before collection of a Direct Debit

The Direct Debit Guarantee provides assurance to the payer that if an error is made in the payment of their Direct Debit by the Service User or the paying bank they will be immedately refunded by the payers bank. It also confirms to a payer that he/she may cancel a Direct Debit at any time.

Payers must be provided with a copy of the Direct Debit Guarantee BEFORE any Direct Debit is collected from the payers account. This is typically provided at the time of initial sign up and is often included on the Direct Debit Instruction. It can however be provided after initial sign up (as the Payer, confirming the Direct Debit Instruction does not have to include the Guarantee) i.e. in a confirmation letter to the Payer, confirming the Direct Debit has been established on their account.

Direct Debit Lodgement (the set-up of a Direct Debit)

Once the paper Direct Debit Instruction has been returned by the payer, (or authority for a Direct Debit has been taken over the phone / internet etc), the information needs to be ‘lodged’ with the bank so they will allow collections of Direct Debits to be made on the payers account by the service user.  There are different ways that this lodgement can occur:

 

  1. Lodging the paper DDI

  2. Electronically lodging information from the paper DDI using AUDDIS

  3. Electronically lodging information from a paperless DDI using AUDDIS

 

Traditional use of Direct Debit involves lodgement by sending the paper Direct Debit Instruction to the bank. The most common problems experienced include:

Box Icon Lost/delayed Instructions

Lost/delayed Instructions

Lost or delayed instructions in the post to the bank

Box Icon Incorrect data entry

Incorrect data entry

Account details incorrectly keyed at the payers bank

Box Icon No confirmation

No confirmation

No confirmation of lodgement being received, or reason for the instruction not being accepted

Since 1996, service users can lodge Direct Debit instructions electronically using Bacs’ Automated Direct Debit Instruction Service (AUDDIS). Paperless Direct Debit sign-up and AUDDIS lodgement processing remove the exchange of paper documents between payers, service users and paying banks.

AUDDIS can address some of the issues experience by postal lodgement.

Box Icon Lost/delayed Instructions

Lost/delayed Instructions

Direct Debit Instructions are sent to the banks electronically & securely

Box Icon Poor handwriting

Poor handwriting

Direct Debit Instructions are automatically loaded onto payers bank account, removing the need for re-keying

Box Icon No confirmation

No confirmation

Exception reports are generated at every stage of the process

Paper Lodgement failures

Traditional use of Direct Debit involves the sending of the paper Direct Debit Instructions to the payers bank for lodgement. Often referred to as non-AUDDIS. The paper lodgement process is:

 

  1. Complete and Return

    The Payer completes the paper Direct Debit Instruction (DDI) and returns it to the service user.

  2. Process

    The service user enters the DDI data onto their system, collates the DDI’s and sends the paper copies to the paying banks by post. DDI’s are either forwarded to the bank or building society that the payer lists as their home bank, or a central processing centre. Paper DDIs must be sent to the bank for lodgement within 6 months of the date that they are signed by the payer.

  3. Receipt

    Instructions are received by the paying banks and lodged against the payers bank accounts. Each DDI will be registered as a single authority given by the payer for the collection of a Direct Debit by the service user.

Paper Lodgement timing

The service user must allow a number of working from date of despatch allowing the payers bank time to action the DDI before the first collection is presented. The default for this is 10 working days. If the bank cannot lodge the Direct Debit Instruction, lodgement failures should be returned immediately or within 3 working days of receipt from the paying bank. Often however, lodgement failures may only be identified at first collection (unpaid collections). The paying bank reserve the right to refuse lodgement without giving a reason, however there are a number of reasons why DDI’s might fail:

  1. Invalid sort code

  2. Invalid account type

  3. Invalid instruction

  4. Account not held / closed

  5. Account name differs

  1. Insufficient / invalid account details

  2. No signature

  3. Lodgement refused

  4. No reference

  5. Direct Debits not permissible on this particular account

The AUDDIS Lodgement (Process)

The AUDDIS lodgement process involves sending data to the payers bank, allowing them to automatically set up an instruction against the payers account. Once setup, collections can commence.

The AUDDIS Lodgement Process is:

 

  1. Complete and return

    The payer completes the paper DDI and returns it to the service user.

  2. Store and scan

    The service user stores the paper DDI as the original paper or scanned image.  (It must be possible to provide a copy within 7 days following a request from a paying bank).

  3. Lodged

    Signed & dated DDI  DDIs should be lodged within 10 days of receipt otherwise the payer must be advised as to the date when it will be lodged:-

    All Direct Debit Instructions must be lodged within 6 months of signature date, else are void.

    AUDDIS Reference numbers must conform to strict guidelines.

    Signed & dated DDI details are entered into the Service User’s finance / CRM system using a manual or automated process).

  4. File

    The service user creates a file of DDI details which are submitted either directly using the service user’s own Bacstel-IP payments software or via a 3rd party (A Bureau via Bureau payments software or Bank through their internet banking).

Bacs Credit and Debit

 

  1. Submit AUDDIS file

    The service user submits the AUDDIS file to Bacs services using the Bacstel-IP application.

  2. Reconcile

    The service user must reconcile any submission errors detailed in the AUDDIS Input Report.

  3. Complete

    Valid DDI are sent on to the paying banks for lodgement against the payers bank account.

  4. Check

    If the bank cannot lodge the Direct Debit Instruction, they will send the service user an AUDDIS Report advising of the reason.

  5. Repeat

    The service user must collect and reconcile the Bank Returned AUDDIS Advice report, based on the reason for the failure. (Bacs reports must be reconciled immediately or within 3 working days).

AUDDIS Lodgement Timings

Service users must wait at least 2 working days before submission of collections for the DDIs lodged (best practice 5 working days), ensuring the advance notice period is complied with.  This compares to at least 10 working days for the lodgement of paper DDIs using a non AUDDIS method.

Paperless Lodgement process (includes AUDDIS)

The paperless and AUDDIS lodgement process consists of all parts of the signup and lodgement process being undertaken with electronic transfers of data and no paper DDI being used.

Paperless Lodgement process including AUDDIS is:

 

  1. Authorise

    The payer gives their authority via a paperless channel for the DD to be set up on their account.  This could be via the telephone or the internet.

  2. Receive request

    The service user receives the payers authority electronically (i.e. via internet sign up screen) or keys the data directly into an electronic system whilst engaging with the payer (i.e. via the telephone or face to face).

  3. Send confirmation

    The service user sends confirmation to the payer that the DD has been set up.  This must be sent within 3 days of sign-up.

  4. Confirmation & Advance Notice

    A combined (Confirmation & Advance Notice) is possible but must be sent within 4 weeks of sign-up

  5. Submission

    The service user submits the electronic DDI (AUDDIS file) to Bacs, using their Bacstel-IP software or  via a Bureau or Banking platform.

  6. Reconcile

    The service user must reconcile any submission errors detailed in the AUDDIS Input Report.

Bacs Credit and Debit Services

 

  1. AUDDIS advice sent

    Valid AUDDIS advices are sent to the paying banks for lodgement against the bank account.

  2. AUDDIS return advice

    If the bank cannot lodge the Direct Debit Instruction, they will send the service user an AUDDIS return advice.

  3. AUDDIS Advice report

    The service user must collect and reconcile the Bank Returned AUDDIS Advice report, based on the reason for the failure. (Bacs reports must be reconciled immediately or within 3 working days).

AUDDIS & Paperless Lodgement Timings

Service users must wait at least 2 working days before submission of collections for the DDIs lodged (best practice 5 working days), ensuring the advance notice period is  also complied with. This compares to at least 10 working days for the lodgement of paper DDIs using a non-AUDDIS method. Paperless is the fastest, beating both the paper and AUDDIS process, primarily because the service user does not have to wait to receive the payers signed authority.