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Direct Debits ~ FAQs
Direct Debits are a superb way to keep control of the money coming into your business, and also enable you to gain total transparency over cash flow. Unfortunately they can also be a bit of a minefield – the rules are complex, the unknowns are frustrating and the admin is often a nightmare.
Below is a selection of the most frequently encountered Direct Debit dilemmas and their solutions:
- I want to offer Direct Debit as a payment method to my customers. Where do I start?
- What is AUDDIS?
- What’s the benefit of using AUDDIS?
- Aren’t there security and fraud risks involved with doing everything electronically?
- If a fraudulent payment is made, who is responsible?
- An Indemnity Claim… What is that?
- How can the account numbers and sort codes that customers provide be verified?
- What happens if a bank requests to see a copy of a signed Direct Debit Instruction?
- How long should DDIs be stored by Service Users?
- I’ve heard about Paperless Direct Debits… What are these?
- How can a DDI be set up via telephone or the internet?
- Does the customer receive any confirmation, given that the system is paperless?
- If a customer does not recall authorising a Direct Debit payment, what action should be taken?
I want to offer Direct Debit as a payment method to my customers. Where do I start?
Your first port of call should be your bank, or ‘sponsoring bank’ (the bank sponsoring your application). When looking at the application, they will take into account several factors, such as the financial stability of your company, the quality of processes in place and the length of time the business has been running.
Successful acceptance onto the Direct Debit Scheme can take up to 6 months, depending on the auditability of the company in question and the degree to which all the paperwork is completed.
What is AUDDIS?
Read our section on 'What is AUDDIS'
What’s the benefit of using AUDDIS?
Essentially, AUDDIS reduces administration for everyone involved in the DD process; banks and Service Users benefit from less paper handling, and customers enjoy a better service through fewer manual re-keying errors. Service Users simply send DDIs electronically, via Bacstel-IP, to the customer’s bank.
Aren’t there security and fraud risks involved with doing everything electronically?
Although there’s no physical signing involved in the AUDDIS process, Service Users verify customers’ details via credit checks, cross referencing with the electoral register or their own historical customer records. Additionally, a requirement of becoming AUDDIS compliant is to satisfy the sponsoring bank with a list of the checks the Service User plans to adopt.
If a fraudulent payment is made, who is responsible?
A – The Service User. According to the Direct Debit Guarantee, the paying bank must refund the customer immediately, and then reclaim the money from the Service User by making an Indemnity Claim.
An Indemnity Claim… What is that?
An Indemnity Claim is essentially a refund claimed by a customer who has been debited wrongly – for example, if a Direct Debit was paid for too high an amount.
The Direct Debit Guarantee entitles the customer to obtain an immediate refund from their bank for any wrongly claimed
Direct Debit. Subsequently, the bank then claims their money back from the Service User.
Automation of Direct Debit Indemnity Claims is currently being planned and
will be implemented by Bacs in October 2010. You can read more about DDICA here.
How can the account numbers and sort codes that customers provide be verified?
Service Users are required to perform modulus checking on all of the bank accounts and sort codes they collect against. The consequences involve failed payments, bank charges and frustrated customers. All of Albany’s Direct Debit management tools include this functionality as standard.
What happens if a bank requests to see a copy of a signed Direct Debit Instruction?
The Service User must provide a copy within 7 days. Generally this is to satisfy disputes between customers and Service Users revolving around signing issues. Faxes, photocopies and image copies are all acceptable, as long as the signature is clearly visible.
How long should DDIs be stored by Service Users?
There is no limit, so this is really a business decision and will differ between Service Users. They must bear in mind, however, that failure to produce a DDI upon request will result in a full refund having to be made.
I’ve heard about Paperless Direct Debits… What are these?
This is another service available to Service Users using AUDDIS. It enables the setting-up of Direct Debits over the phone or by the internet, without signing a paper mandate.
How can a DDI be set up via telephone or the internet?
The Service User will ask the customer authorising the DDI to supply personal details such as their bank account, sort code and account name using an approved script. If the DDI is being set up on the internet, it must be done using the Service User’s website. These details are then verified and the DDI is lodged with the paying bank via AUDDIS. Prior to use, all telephone scripts and internet screens are approved by the Service User’s bank.
Does the customer receive any confirmation, given that the system is paperless?
Service Users must send a written confirmation of the DDI to the customer within 3 days of it being set up. Alternatively, this communication must be received 10 days prior to the first collection being made.
If a customer does not recall authorising a Direct Debit payment, what action should be taken?
Firstly, the Service User should send a copy of the DDI to the paying bank. While this is being verified, the customer is entitled to a full refund under the terms of the Direct Debit Guarantee. If the Service User is unable to supply a copy of the DDI within 7 working days, they must refund the bank in full. The Service User is then required to take up the dispute with the customer.
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