Direct Debit Guarantee

Direct Debit Guarantee

Direct debits are now a major part of daily life, with many people using them each month to pay their household bills. The direct debit guarantee is a powerful safeguard for customers. So it’s important that firms make sure their staff understand its provisions.

Unfortunately, many do not. Here are some of the things firms have told customers (incorrectly) when problems have arisen:

‘We don’t operate the direct debit guarantee.’

‘You’ll have to contact the originating company for a refund.’

‘We need a month’s notice to cancel a direct debit.’

‘The guarantee doesn’t apply – because you haven’t suffered a loss.’

If you pay by standing order, it is up to your bank to send the payment. If you pay by direct debit, it is up to the payee’s bank to call for the payment, but you will rightly look to your own bank/building society to ensure the smooth running of any direct debits. Mistakes and errors are covered by the direct debit guarantee.

The Direct Debit Guarantee

The direct debit guarantee applies to all banks and building societies taking part in the direct debit scheme. It says that:

• If there is a change in the amount to be paid or the payment date, the person receiving the payment (the originator) must notify the customer in advance.
• If the originator or the bank/building society makes an error, the customer is guaranteed a full and immediate refund of the amount paid.
• Customers can cancel a direct debit at any time by writing to their bank or building society. It is also recommend you notify the organisation concerned.

See here for case studies and decisions by the Financial Ombudsman

Cancelling Direct Debits

You can cancel a Direct Debit at any time and the process is very straightforward.

Simply contact your bank or building society, if this is by phone or internet, written confirmation may be required. We also recommend you notify the organisation concerned.

Your bank or building society can make the cancellation up to and including the due date, but try not to leave it until the last minute or you run the risk of a payment being made.

Remember that cancelling the Direct Debit simply stops paying the organisation. If you carry on receiving the goods or service then you will have to organise an alternative payment method.

The information you should provide in order to cancel is:

• the name of the organisation being paid
• your bank or building society account number
• the name(s) on the account
• the branch sort code (see your cheque book)
• your customer reference with the organisation (if possible).

The more information you can give, the easier it will be for the bank or building society to action, so if you know the amount and payment date include this information too.

Money cannot be collected from your account after you have cancelled. An organisation would have to obtain your authority to reinstate a cancelled instruction

For more information see BACS:Direct Debit