Understanding cancelled Direct Debits

At some point, you may encounter customers who cancel their Direct Debit without informing you. It can be a frustrating issue to deal with, especially if the customer has also requested a refund for the last few months’ payments. To help you navigate this situation, we’ve compiled some key points to keep in mind.

The Direct Debit guarantee

Under the Direct Debit Guarantee, customers have the right to cancel their Direct Debit Instruction and request a refund of the funds paid out. As a Service User, it is important to note that the bank is responsible for verifying the validity of the cancellation request. If the request meets the criteria set out in the Service Users Guide, the bank will honour the request.

Refunding cancelled Direct Debits

While it may be tempting to refund the customer directly, it is better to follow Bacs’ advice and ask the customer to raise an indemnity claim. If you refund the customer directly, they may still raise an indemnity claim with their bank, which could result in you paying back the money twice.

Counterclaims and appeals

If you believe an indemnity claim has been raised incorrectly, there is a counterclaims and appeals process. It’s important to note that these processes are subject to strict rules.

Direct Debit instruction: A contract between the customer and bank

As a Service User, it’s important to understand that the Direct Debit Instruction is a contract between the customer and their bank. Therefore, the bank is more likely to honour the customer’s request to cancel the Direct Debit Guarantee. It is then up to you, the Service User, to respond according to the circumstances.

Alternative payment routes

If you have a contract with the customer for a service to be delivered, you have the right to request payment via an alternative route, even if the Direct Debit Guarantee has been invoked and the Direct Debit is cancelled.

Reinstating the Direct Debit instruction

If a Direct Debit Instruction is cancelled and you subsequently agree with the customer to start collecting their money via Direct Debit again, you may be able to reinstate the Direct Debit Instruction without a new DDI needing to be signed. If a new DDI is required, you will need to follow the appropriate steps outlined in the Service Users Guide.

Remember: communicate with customers

Lastly, the key to resolving cancelled Direct Debit issues is to keep communicating with your customer to understand their concerns.

If you have any questions or need further support, please do not hesitate to contact us. We are here to help you navigate the technicalities of Direct Debit management.