The Direct Debit Guarantee acts as a safeguard for customers. It minimises the risks associated with payments made in error. The Direct Debit Guarantee makes Direct Debit the safest payment method in the UK.
Direct Debit is the most popular method for customers to make recurring payments to businesses. Customers that enter into a Direct Debit contract give businesses permission to take regular payments from their bank account and this demands a high level of trust.
The Direct Debit Guarantee is a set of guidelines protecting customers from fraudulent and wrongful payments. All businesses under the scheme are bound to the rules of the Direct Debit Guarantee and breaches are taken incredibly seriously. So seriously, in fact, that if a customer raises a claim, they can usually expect a full and immediate refund within two hours.
What does the Direct Debit Guarantee look like?
The above image shows an example of a Direct Debit Guarantee form. This must accompany the initial Direct Debit mandate (if online, then this should be presented before they click submit) and also be provided before payment is taken from the customer’s account. The Direct Debit Guarantee contains the following text:
● This 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, (insert organisation name) will notify you (insert number of) working days in advance of your account being debited or as otherwise agreed. If you request (insert company name) 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 (insert company name) 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 (insert company name) 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 us. This Guarantee is offered by all banks and building societies that accept instructions to pay Direct Debits.
How are customers protected under the Direct Debit Guarantee?
The Direct Debit Guarantee will initially be provided to the customer through their own bank or building society. From this point on, it is the responsibility of the service provider to issue the Direct Debit Guarantee. The guarantee must be provided in English, or in a Welsh format if it applies.
There are three primary ways that customers are protected under the scheme:
Businesses must provide customers with ten working days advance notice before taking a payment from their account. A single notification is enough for fixed payments; however, an updated notice must be sent in changes to amount or frequency.
Advance notice must include the following information:
● Direct Debit reference (a name or information on the service provider)
● The collection amount
● The collection date
● The frequency or schedule of payments
● Advance notice period
● Service provider contact details
Full and immediate refunds are offered in the event of an error, or if the payment doesn’t match the terms laid out in the advance notice. Issues are so rare that only 0.2% of all Direct Debit payments are refunded. In the instance that a payment issue has occurred, customers will raise an indemnity claim with their bank or building society.
It is possible for businesses to appeal an indemnity claim if they feel the payment has been wrongfully refunded. They must be able to prove at least one of the following:
● The claim was directed at them as a mistake, instead of the rightful service provider
● A duplicate indemnity claim was submitted more than once
● The reference was not included or was incorrect
● The amount specified in the claim does not match the actual payment
Customers have the right to cancel a Direct Debit whenever they choose either through their bank/building society or their service provider. Banks will generally require at least one days’ notice before a Direct Debit is due to leave the customer’s account in order to ensure that payment isn’t made.
At DFC, we offer a full service approach to collecting Direct Debit membership payments for gyms, leisure centres and other health & fitness operators.
We are focused on making running your business easier. Reducing time spent on admin work, and helping you take control of your entire member journey to increase retention and revenue.
DFC is brought to you by Xplor, the first global platform integrating software, payments, and commerce-enabling services to help businesses thrive.