Are Bacs Payments Protected? (Direct Debit Guarantee)

Direct Debits are the most popular way of making recurring payments for bills, subscriptions and more. Direct Debits are used by nine in 10 people in the UK and in 2022, 4.8 billion payments were made via direct debits. Each Direct Debit comes with a guarantee, but are Bacs payments protected? What is the Direct Debit Guarantee and what does it entail? Continue reading to find out.

What Are the Direct Debit Guarantee Rules?

There are certain rules that apply to the Direct Debit Guarantee, and they are:

• The Direct Debit Guarantee is offered by all banks and building societies that accept Direct Debit instructions.
• If any changes are needed to be made to the amount, date or frequency of your Direct Debit, you will be notified within three working days.
• If an error is made in the payment of your Direct Debit, such as the wrong amount being taken or taken more than once, you’re entitled to a full refund from your bank. If you receive a refund that you’re not entitled to, you must repay it immediately.
• You’re able to cancel a Direct Debit at any time by contacting your bank or building society. Written confirmation may also be required. If you cancel within a set contracted period to a company, you must contact them to inform them and discuss your next steps.

How Does the Direct Debit Guarantee Protect Customers?

The Direct Debit Guarantee protects customers in three main ways. This level of protection is appealing to many consumers, which is a reason why so many people and businesses sign up to Direct Debits.

The three main types of protection a Direct Debit offers are:

Notifications

The first level of protection the Direct Debit Guarantee offers is notifications. You must be notified in advance of each payment taken. Failure to follow these requirements can result in refunds under the guarantee. For regular payments of a fixed amount, it is the company’s responsibility to inform the customer with a single notification containing the details of the frequency and amount to be taken. For example, if signing up to a 24-month contract with a phone service provider, the customer will be notified at the beginning of the agreement, informing them of the number of payments and the amount that will be taken each month.

If payments vary in frequency and amount, a customer must be notified of the details in advance before each one is taken from their account. Notices can be given in writing or electronically, and must be clear in their wording.

There is just one exception for notifications of payment. If the customer requests immediate payment from their account, the company is not entitled to inform them with advanced notice.

Refunds

The second level of protection the Direct Debit Guarantee offers are refunds. As previously mentioned, if there is an error with a payment, either the wrong amount taken, a payment taken on the incorrect date or multiple payments taken, then the customer is entitled to a full, immediate refund.

Cancellations

A Direct Debit Guarantee also offers assurances over cancellations. It is a customer’s right to contact their bank or building society and cancel a Direct Debit agreement at any time. If any Direct Debit collections are made after the cancellation, a refund can be provided under the guarantee.

What is a Direct Debit and What Can They Be Used For?

A Direct Debit is a payment instruction from you to your bank or building society, authorising the company you want to pay to collect varying amounts from your account at regular intervals. After an agreement has been made, payments are then taken automatically. It is the customer’s responsibility to ensure that enough funds are available at the time of payment.

What can Direct Debits be used for then? Any regular payment (monthly, quarterly or annually) can be done via Direct Debit. This includes rent or mortgage payments, phone contracts, subscriptions like Netflix and Disney+, credit card payments and much more.

For more about direct debits and payment transfers, see our post on 'What is Bacs transfer?'

Direct Debit Sign-Ups Made Easy With Interbacs

Interbacs’ Direct Debit Management Systems Online Sign-up includes customer sign-up modules to suit various business needs. These include fully compliant customer-facing secure Direct Debit sign-up websites that are bank approved, as well as modules for internal use and over the phone sales.

However you’d like to manage Direct Debit set-ups, Interbacs has the tools and advice you need to streamline your processes and comply with Bacs rules. The built-in Modulus checking facility verifies sort codes and account numbers at the point of sale. This is required to be updated monthly by Bacs. However, the EISCD is updated weekly to ensure the bank details are always as up to date as possible.

We also provide enhanced payer checks which confirm the identity and the bank account of the payer.

We can also tailor your Direct Debit Sign-up Portal to display your logo and brand colours to provide extra reassurance to your clients.

If you're looking for a way to streamline your direct debit payments from a committed organisation that prioritises secure service, check out our Bacs-approved software Interpay today.