The Direct Debit Instruction: Its importance and what it must contain
What is a Direct Debit Instruction?
A Direct Debit Instruction (DDI) is authorisation by a payer to their bank for funds to be withdrawn from their account to pay a service user (a business, or rarely an individual). A Direct Debit collection cannot be initiated without a compliant and complete DDI, so it is important that the instruction complies with Bacs guidelines and has accurate information.
What should the DDI contain?
As per the guidance provided on the Bacs website, the DDI must hold the following information:
- The service user’s name and address
- Direct Debit logo
- The service user’s Service User Number (SUN)
- The heading ‘Instruction to your bank or building society to pay by Direct Debit’
- The name and full postal address of the bank or building society where the payer’s account is held
- The name(s) of account holder(s)
- The payer’s branch sort code
- The payer’s bank or building society account number
- The service user’s reference
- Payer’s instruction to debit their account including reference to the Direct Debit safeguards under the Direct Debit Guarantee, signature(s) and date.
There are a number of additional rules and guidance notes which Bacs outlines in its complete Service User’s Guides and Rules to Direct Debit documentation, for example best practice guidance on including the Direct Debit Guarantee, and the design and format of the DDI. Importantly, Direct Debits can be variable so it is important that the amount, date and frequency are not quoted on the DDI, the exception being in the service user’s ‘official use box’.
Prior to starting to collect by Direct Debit, the DDI has to be approved in writing by the service user’s sponsoring payment service provider (PSP). To make it easier, Bacs has a range of approved templates on its website, and all SmartDebit customers are advised of the DDI format to use which we know has been successfully approved previously.
What should be completed by the payer for the DDI to be successfully lodged with the paying PSP?
The payer is required to complete the following information on the DDI:
- Name and full postal address of the bank or building society of account holding branch
- Name(s) of the account holder(s)
- The sort code number of account holding branch
- The account number
- Date and account holder’s signature.
In addition, a clear instruction must be given to the payer to return the completed DDI to the service user who will lodge the DDI with the payer’s account holding branch.
How does SmartDebit help businesses to ensure the DDI is completed correctly?
At SmartDebit we ensure our customers not only use an approved template which their sponsoring PSP are likely to accept, we also help to ensure that DDIs are completed correctly by payers when doing initial checks. By doing so, the DDI will be lodged successfully with the paying PSP, there is less chance of any errors when collecting Direct Debit payments, and there will be less chance of an indemnity claim.
To help with this, SmartDebit customers have access to a modulus checking service within our provided online payer sign-up pages which verifies the validity of the payer’s sort code and account number and checks that Direct Debits can be collected from that account, i.e. the account is not a savings account or other account type which does not accept Direct Debit collections. In addition, when inputting payers into our Pulse® portal the same modulus check is performed which is convenient for paper DDI transcriptions.
SmartDebit has over 20 years experience in collecting payments and Direct Debit. To benefit from our award-winning service helping businesses to be paid on-time, all the time, contact us.