New Bacs Direct Debit rules make it easier for customers to switch provider
By Ahmed BadrDec 20172 min read
We’re delighted to share news that Direct Debit providers can no longer stop customers from switching to another provider, thanks to changes in the Direct Debit scheme rules, announced by Bacs on 10 November and supported by the UK Payment Systems Regulator (PSR).
We believe that every business should be able to move between payment providers freely, so we’re delighted that Bacs is making these rule changes, which GoCardless has campaigned for since 2015.
What is changing?
Under the old rules, companies who processed Direct Debit on behalf of merchants (sometimes known as Facilities Management or ‘FM providers’), could request that an outgoing Direct Debit provider transfer across all of a customer’s existing Direct Debit mandates to them, known as the bulk change process. However, the outgoing FM provider was under no obligation to meet that request.
The new rules, which take effect from January 2018, require all FM Direct Debit providers using the Bacs Direct Debit scheme to be certified by Bacs. As part of that certification, FM providers must commit to use the bulk change process.
End to an unfair practice
Until now, this loophole in the Bacs Direct Debit scheme rules has allowed some providers to hold hostage unhappy customers and effectively prevent them from switching to a new provider. As a result, some businesses have been stuck using a service that may not suit their needs.
Since late 2015, GoCardless has been working hard to bring to an end this unfair and anti-competitive practice, meeting frequently with Bacs, the PSR and other industry parties.
In August 2017, the PSR responded to our requests and launched a public consultation to investigate whether Bacs should change its rules and require Direct Debit providers to help customers change providers more easily.
We’re delighted that Bacs took the decision to proactively make these rule changes, before the PSR published the outcomes of its consultation.
The PSR has stated that it’s happy with Bacs' proposed changes, but plans to use its powers to direct Bacs, with the aim of ensuring that Direct Debit users are able to move between providers effectively, and that Bacs’ plans for the FM Direct Debit provider accreditation are comprehensive and fair.
Our commitment on this issue remains the same. We realise that switching can take place in any direction and for some time now, we have publicly committed in our Merchant Agreement to helping our customers change providers if they want to do so, including through the use of the bulk change process. We’re confident enough in our service to know that this doesn’t happen often.
You can read more about the bulk change process in our Guide to transferring Direct Debit mandates.