Using Direct Debit
You’ve set up a Direct Debit to pay a bill or to buy something - what do you need to do now?
Managing Direct Debits
Don’t “set up and forget” – check your Direct Debits regularly
Managing your Direct Debits is easy but don’t “set up and forget”. Check your bank account regularly to make sure they’re being taken as you expected (right date, right amount), and that you’ve remembered to cancel any you no longer need.
You’ll get advance notice of the amount and date of a Direct Debit from the company you’re paying
Anyone who collects Direct Debits from you has to let you know, in advance, how much will be taken and when. This is usually in the form of a bill but could be a simple letter, text or email note if, for example, you’ve signed up to pay for something in instalments; it is the biller’s responsibility to send the communication via the channel you have agreed with them. To note, missing the communication is not grounds for a refund.
If something goes wrong, your Direct Debits are protected by the Direct Debit Guarantee
If there is an error in the set up or collection of your Direct Debit, you are protected by the Direct Debit Guarantee. Wrong amount been taken? You can ask your bank for a refund. Gone out on the wrong day? Guarantee covers that, too. Direct Debit fraud is rare – all those verification checks make it harder for fraudsters – but the Guarantee is there for that, too.
The Guarantee only protects your Direct Debit payments. It doesn’t cover you if you have a dispute with someone, for instance if a product you buy breaks and the seller won’t refund; or you haven’t had a great service; or if a company should go into administration.
Your Direct Debits will even go with you if you swap banks, so you won’t have to do anything. Check out the Current Account Switch Service website to learn more.
Who does what
- The organisation you’re paying either asks you to physically sign a Direct Debit Instruction (a paper Direct Debit) or you give them permission to set one up over the phone or online (a paperless Direct Debit)
- The organisation sends that Instruction to your bank, which tells them you have given your authority for the bank to make the payments to that organisation
- When a payment is due, the organisation asks the bank to send it to them
- Because they have your permission (your authority), the bank sends the money.
It is important for you, as the account holder, to check the name of the organisation collecting your Direct Debit; this is not always the same as their company name. We also advise that you check your account regularly, including checking any new Direct Debits to ensure amounts and times of collection are correct. Should there be a payment you don’t recognise, you should contact your bank or building society immediately.
Your bank or building society
When you give permission for a Direct Debit to be set up - called a Direct Debit Instruction - the company you are paying will send the Instruction to your bank or building society. That means the bank or building society knows who you have agreed to pay. You can find a full list of all your Direct Debits on your bank account, either online or directly from your bank or building society.
If something goes wrong and you need to make a claim under the Direct Debit Guarantee, this is the first place you should go as the bank or building society is responsible for refunding any money collected in error.
The company or organisation that you are paying by Direct Debit (also called an originator or service user)
You set up a Direct Debit directly with the company that you are paying for goods or services. That can be over the phone, online, or in writing.
They are responsible for making sure Direct Debits are collected in line with the advance notice they sent to you. It’s important that you let them know if you have any problems with payments, particularly if you miss any payments due. Your bank could charge you if a Direct Debit doesn’t go through because you don’t have enough money in your account.
It’s important to be aware that it is your bank or building society that you should contact if you think you have a claim under the Direct Debit Guarantee for an error in the collection of a Direct Debit.
Bacs is part of the leading UK retail payments authority, Pay.UK, which is responsible for the clearing and settlement of Direct Debits in the UK. Pay.UK makes sure organisations using Direct Debit follow the rules.
The Financial Ombudsman
The Financial Ombudsman is the independent service for settling disputes between consumers and businesses providing financial services, and they can help you if you and the company you’re paying, don’t agree. You can contact them at www.financial-ombudsman.org.uk.