ID checking is required for any organisation using Paperless Direct Debit (PDD) sign up. The Service User’s Guide and Rules to the Direct Debit Scheme (Section 16.3) states: “Prior to the origination of any Direct Debits the service user must verify the identity of the payer and his address, and ensure that the account details provided relate to the payer.” But how do you do this?
The Rules suggest a number of different possible approaches to ID checking, including:
- using historical data for existing customers
- using a selection of registers such as the electoral roll, post code lists or credit rating lists for new customers. It goes on to advise that these are available from Local Councils, the Royal Mail or other suppliers.
So for existing customers it seems simple enough, we can confirm their name and address by asking them a couple of security questions. But how do we check that their bank details belong to them?
For new customers it gets a bit harder. First of all we have to check their identity. Well, the electoral roll and post office address lists can tell us if someone exists with the name the customer has given. They will also tell us if the address given exists, but is this really confirming the individuals identity? Can we guarantee that the individual signing up is the person they claim to be? Maybe not, but the Direct Debit Rules suggest that these are acceptable sources and should be good enough for an ID check. We are of course still stuck with confirming that the bank details belong to the individual and that is a lot harder!
To check someone owns their bank details is virtually impossible without seeing a copy of photo ID and checking the likeness in person before confirming the bank details against a cheque book, bank statement or similar. Well by the time that has been done, it would probably have been easier to get them to fill out a paper form where the rule doesn’t apply. There are a couple of services out there (provided by CallCredit and Experian) that get fairly close to checking bank details. In some cases they can use credit reference data to check that the bank details actually belong to the individual but neither company has a complete set of data and the services can be pretty expensive to use. There are also likely to be a number of results that can’t be checked and then you are back to square one. So, do we then accept the customer or not?
Paperless Direct Debit has huge advantages for any organisation that is signing up large volumes of payers but compliance with the rules is virtually impossible to achieve so what can you do?
Well the answer seems to be…the best you can. From our conversations with people in the banking industry and even sources close to Bacs it seems as though it is generally recognised that it is not a perfect system. When you apply for Paperless Direct Debit you will have to say what you feel you are able to do and then see if this is sufficient from your sponsoring banks point of view. Ultimately the bank have to make the decision as to whether they will allow you to use Paperless sign up methods.