A Direct Debit is an instruction from a payer that approves an organisation or company to take an amount from their bank account or building society on a regular basis.
A customer agrees with the organisation how much should be taken and the date of payment (or collection). If the amount or the collection dates change, payers must be notified in advance.
Direct Debit is a simple, safe and speedy way of paying regular bills for variable amounts such as council tax; or fixed amount memberships, like magazine subscriptions.
Paying by Direct Debit
Many UK bill payers prefer to pay by Direct Debit, because it’s fast, easier, secure and saves time and effort.
Collecting by Direct Debit
Using Direct Debit to take or collect recurring payments from customers is usually the most reliable method for most businesses. Money is transferred directly into their bank account, saving time and reducing the cost of collections.
A Standing Order means that a customer gives permission to the bank to pay an exact amount to another account on regular basis and on a specific date.
A Direct Debit means that a customer gives permission to an organisation to collect regular payments of variable amounts from their bank account when it is due. To change the amount or date, the company will need to tell you in advance.
The Direct Debit Guarantee gives reassurance to customers that paying by Direct Debit is the most secure and safest method to make payments in the UK.
The Direct Debit Guarantee helps to protect customers from payments being taken by mistake. In essence it provides assurances to payers that any money collected in error by an organisation (the Direct Debit Service User) will be immediately refunded.
The Direct Debit Guarantee:
- The Guarantee is offered by all banks and building societies that accept instructions to pay Direct Debits
- If there are any changes to the amount, date or frequency of your Direct Debit the organisation will notify you (normally 10 working days) in advance of your account being debited or as otherwise agreed. If you request the organisation to collect a payment, confirmation of the amount and date will be given to you at the time of the request
- If an error is made in the payment of your Direct Debit, by the organisation or your bank or building society, you are entitled to a full and immediate refund of the amount paid from your bank or building society
- If you receive a refund you are not entitled to, you must pay it back when the organisation asks you to
- You can cancel a Direct Debit at any time by simply contacting your bank or building society. Written confirmation may be required. Please also notify the organisation.
Direct Debit Indemnity is a way of claiming back Direct Debits that have not been authorised.
An organisation wishing to become a Direct Debit Service User must contact its bank who will advise on all the steps involved.
Once you have spoken to your Bank Manager, please get in touch to see how we can help you with filling in the application forms and with the submission of Bacs test files to achieve a Direct Debit live date.
Rapidata has helped hundreds of organisations with setting up Direct Debit services. If you are looking to reduce the risk of making submissions yourself or would like to remove your admin burden, give us a call for a no obligation quote on 01293 601111 or firstname.lastname@example.org.
If you are operating Direct Debit, you must comply with the Service User’s Guide and Rules to the Direct Debit Scheme. You can download the Direct Debit guide and rules from the secure area on the Bacs website.
Service Users are provided with a document that outlines their responsibilities when operating and marketing Direct Debits. The Direct Debit rules are updated over time and Rapidata will always endeavour to update it’s clients when a new version become available.
The rules* cover the following:
- The essentials of using Bacs
- Becoming a service user
- The payer's authority
- Payer protection
- The collection process
- Maintaining customer authorities
- Exception events
- Monitoring of the scheme
- Exit from the scheme
*taken from v5.1, December 2017
Advance Notice is the method by which Originators give notice to the payer before the first Direct Debit payment is collected and following any changes to the Direct Debit payment in respect of amount, Direct Debit due date and / or frequency. The Advance Notice must be clear and unambiguous personalised advice and must be identified as such at first glance by the payer.
The Advance Notice must provide the following details:
Total amount of the Direct Debit to be applied to the Payer’s account
Direct Debit due date
Frequency of the Direct Debit
Direct Debit reference number
Advance Notice period
Download example of the standard Advance Notice
Is now a good time to contact us for a no obligation quote to manage and process your Auddis and Direct Debits?
There is a standard format for the Direct Debit Instruction (DDI) to make it easier for payers to complete the necessary details. The design can be found in the Service User's Guide and Rules to the Direct Debit Scheme which can downloaded from the Bacs website.
The Bacs website also has a good page that will help you create your Direct Debit Instruction with some example forms.
NOTE: All forms must be approved by your Sponsoring Bank before use. However we can review them for you before you send them to your bank.
The Direct Debit logo must be included on all Direct Debit Instructions and Bacs have provided guidelines on how and where to use it.
Download the Direct Debit guidelines and logo
Once the payment has been submitted, timings for processing Direct Debit payments is via the Bacs 3-day payment cycle.
- Day 1 (Input) – this is the latest day a business or bureau may submit a payment file to Bacs for a processing cycle.
- Day 2 (Processing) – payment files are delivered to the recipient banks which then process each payment.
- Day 3 (Entry) – Direct Debits are debited from the payers’ bank account and credited to the organisations’ nominated bank account.
A Direct Debit payment is only considered successful if no failure report is raised several days later.
ADDACS stands for ‘Automated Direct Debit Amendment and Cancellation Service’.
This is an automated service used by Banks & Building Societies to advise Originators of any amendments or cancellations to the DDI.
AUDDIS stands for ‘Automated Direct Debit Instruction Service’.
AUDDIS enables organisations to setup new Direct Debit Instructions (DDI) at their customers’ bank electronically instead of in paper format.
For any organisations looking to setup a Direct Debit facility with their bank, it has now become a mandatory requirement for all new Service Users.
For organisations wishing their payers to sign-up to a Direct Debit online or over the phone, you must be setup and compliant under AUDDIS. You will also need to be setup for Paperless Direct Debit.
AUDDIS Migration for non-AUDDIS Service Users