Direct Debit Blog

The Service Users Guide and Rules has been updated again with version 3.5 having now been released. There are only a few minor changes in this version with the key changes as follows:-

1. It is no longer a requirement of the Direct Debit Scheme that a paper Direct Debit Instruction is sent to a customer if they do not wish to go through the Paperless Direct Debit sign up process. It is now possible to simply not pursue that Direct Debit sign up.
2. As of January 2013 (Though this has gone into the rules now to give people some advance warning) it will become a prohibited practice for a Service User to send a “0c” transaction code to the old bank when a Bank has been transferred as a result of an ADDACS report code 3

The other major change is that Bacs have now provided example screens that will help developers with building their internet sign up pages. These can be used as a template which will help to get your internet screens approved by the sponsoring bank.

Direct Line is the first car insurance company that we are aware of to  offer motorists car insurance in monthly instalments by Direct Debit at no extra cost. Aalmost every other industry has embraced Direct Debit as their preferred method of payments to the extent that they throw incentives at us to sign up to a Direct Debit. We are always seeing Energy companies, telecoms providers, magazine subscriptions, and gym memberships offered at a discounted rate for Direct Debit.

Until now the car insurance industry has had such a fear of fraud that they have always been desperate to get our money up front, even though it makes life much harder and more expensive to collect through card payments and the other alternatives. In fact this has led to some of the worst Direct Debit sign up rates that we have seen. In figures released by Bacs last year a whopping 81% of all life insurance was paid for by Direct Debit as opposed to 51% in the Car Insurance sector.

Direct Line are certainly breaking some ground here but before we get too excited this may not be the leak that breaks the dam, Direct Line are only offering this until the 20th of November. Still it’s good to see one of the big firms trying this out and with them currently offering 12 months for the price of 10 on top, they may be worth considering if you are up for renewal.

Gavin Lawrence.

There is one consistent mistake that we see from organisations when conducting our Direct Debit Training and Direct Debit Audits and it could prove to be a costly one.

The Direct Debit Guarantee states that a customer seeking to claim should contact their bank for a full and immediate refund. Yet many people automatically contact the Service User, i.e. the organisation that is collecting. Service Users do not seem to be as aware as they should be that any customers approaching them for a refund directly should refer them to their bank to raise the indemnity claim.

Many organisations that we have worked with are making refunds by remitting directly into the customer’s bank account. You may wonder what is wrong with that, the customer gets their money back and the problem is resolved.

But hang on….what happens if the customer also contacts their bank for a refund directly? With no proof that the sum refunded was anything to do with the Direct Debit the customer could end up with a double pay out.

The Direct Debit Scheme Rules specifically prohibit this method of refunding the payer. When we explain this to our clients they often explain that they would end up with irate customers that are demanding a refund. We understand this, so there are 2 things that you may be able to do to help with this.

1. Explain to the customer that they will get their money refunded straight back into their bank account immediately if they contact their bank. From experience with the major banks this would be the same day as cleared funds in most cases. This is likely to be faster than a Bacs payment direct to the customer.

2. If you still don’t think this would work for you, you are permitted to raise the indemnity claim with the payer’s bank on their behalf. There is a list of the correct contacts in the secure area of the bacs website.

Of course you are always better off avoiding claims in the first place by ensuring that you run the scheme correctly and that all staff have Direct Debit Training but if you do have an indemnity claim it is worth bearing the above in mind!

2

As we approach the winter months again and Energy prices seem to be very much back in the public thinking with David Cameron pledging to get bills down. The latest idea seems to be that the Energy companies have agreed to write to 8 million customers advising them that they can save £100 by simply switching to a Direct Debit payment.

Is this going to have a serious impact on the overall amount that the UK population has to spend on their Energy bills? I am not convinced. According to Bacs statistics 85% of people that take combined Gas & Electric already pay by Direct Debit , if this is the case then that is statistically a greater proportion of the overall customers that use Direct Debit to pay for their energy than in most other sectors, Council Tax achieves 69% paying by Direct Debit and for our Phone Bills 76% choose to pay by Direct Debit . With 4% of the population unable to use Direct Debit for one reason or another it seems there is only so much that Direct Debit can do to help. It seems as though this has more style than substance and perhaps there is little wonder that the Energy companies have been happy to agree it.

That said, we can’t stress enough that if you don’t pay by Direct Debit you are missing out and there really is no downside with a cast iron Direct Debit Guarantee that protects all consumers, also if you are concerned about them taking more money up front than neccesary, most suppliers will allow you to negotiate this if you feel it is incorrect.

Organisations such as Uswitch have the information that you need. Most importantly you should remember that regardless of the method of payment, there are better deals out there, very few people are on the best possible tariff and switching regularly could save you a considerable sum as well as keeping the big companies competitive!