The Direct Debit Guarantee

The Direct Debit Guarantee protects customers from payments taken in error. In the case of any incorrect or fraudulent payments, the payer is entitled to a full and immediate refund from their bank.

The Direct Debit Guarantee


The Direct Debit Guarantee protects customers from payments taken in error. In the case of any incorrect or fraudulent payments, the payer is entitled to a full and immediate refund from their bank.


The Direct Debit Guarantee (or the “Direct Debit Indemnity”) is the Direct Debit scheme’s customer protection. The Guarantee protects customers against payments made in error or fraudulently, making Direct Debit the UK’s safest payment method. The full text of the Direct Debit Guarantee is available below.

This guide describes the protection your customers receive, your obligations under the Direct Debit Guarantee, and how to dispute an invalid refund claim.

The Direct Debit Guarantee rules

Direct Debit Guarantee

The Direct Debit Guarantee protects customers in three ways:

  1. Notifications - customers must be notified in advance of each payment. Failure to follow notification requirements may result in a merchant being barred from the scheme. This is typically 10 working days before a payment is taken but a shorter notice period can be agreed. See our guide to taking payments for more details.
  2. Refunds - customers are entitled to a full and immediate refund of any payment that has been taken in error.
  3. Cancellations - customers can cancel a Direct Debit mandate at any time by contacting their bank. For more information see our guide to cancelling Direct Debit mandates.

Each of the above protections are enforced by the banks and so form an intrinsic part of the Direct Debit scheme. Refunds and cancellations are processed by the payer's bank without prior discussion with the merchant.

The indemnity claim process

Under the Direct Debit Guarantee, the rules around refunds are particularly strong. A customer can request a refund (known as an "indemnity claim") for any payment, and provided the bank agrees with the validity of their indemnity claim, the customer will receive an immediate refund. Further, there is no time limit on when indemnity claims can be made.

To raise an indemnity claim, a customer must notify their bank that they believe there has been an error. This "error" is defined broadly, and includes any dispute about the amount taken.

The customer's bank will generally accept the word of the payer, and if they do will immediately credit them with a full refund. They will then notify the merchant of the indemnity claim via a DDICA message with a reason code, available through Bacs. The amount refunded to the customer will be reclaimed from the merchant automatically 14 working days later.

How to challenge a Direct Debit Guarantee indemnity claim

Indemnity claims can be challenged prior to settlement if the paying bank makes one of the following mistakes:

  • The indemnity claim has been directed to the wrong service user
  • The same indemnity claim has been submitted more than once
  • The reference was not included or was incorrect
  • The amount of the indemnity claim does not correspond to the payment made

If one of the above apply, you may be able to challenge the indemnity claim.

Contact details for the challenge process are provided on the BACS website but you will need to log onto the password protected area of the site. Once you are logged in additional links will appear in the left hand navigational menu below the "DDIC" tab.

How to dispute an indemnity claim

Merchants may not agree that an indemnity claim should be upheld. Within the Direct Debit scheme there is limited scope for appeal, but fraudulent indemnity claims can be dealt with in the courts.

The only grounds to dispute an indemnity claim within the Direct Debit scheme itself are:

  1. The customer's bank has made an error in raising the indemnity claim. For example, the customer's bank may have mistakenly sent the same indemnity claim twice.
  2. The customer's bank failed to inform the merchant after the customer's mandate was cancelled, and then allowed payment to be taken under the cancelled mandate. In this case the customer's bank are liable for the indemnity claim, as they are responsible for it.
  3. The customer claims they never signed a Direct Debit Instruction, but the merchant can produce a signed paper DDI, which the customer then accepts.

Such counterclaims must be submitted to your sponsor bank within 14 working days of an indemnity claim being settled. Any counterclaims made after this deadline will be automatically rejected.

To make a counterclaim under the Direct Debit scheme you will need to provide your sponsor bank with the following details:

  1. The date and amount of the indemnity claim
  2. Your bank account details, SUN and reference number
  3. A copy of the indemnity claim

If the claim succeeds, it can take another 120 days for the funds to be refunded to you.

Given the limited scope for appeals within the Direct Debit scheme, most disputes happen outside of it. The Direct Debit Guarantee does not impact any contractual agreements between a merchant and their customer, and fraudulently charging back a Direct Debit payment is a criminal offence, covered by the 2006 Fraud Act.

The Direct Debit Guarantee in practice

In practice, less than 0.2% of all Direct Debit payments are refunded via the Direct Debit Guarantee. This rate, however, varies significantly depending on business type, as does the severity of the indemnity claim.

The risk of indemnity claims under the Direct Debit Guarantee is particularly high for businesses selling:

  • High value goods such as cars, where the merchant stands to lose a lot from a single fraudulent indemnity claim.
  • Liquid assets such as currency or loans, which could be a target for fraudulent indemnity claims.
  • Services likely to see indemnity claims, such as gambling and payday loan services.

The risk of facing an indemnity claim can be minimized by:

  • Giving proper advance notice. If customers are provided the required advance notice they will be able to raise any issues or cancel the payment before it is made. For more information see our guide to advance notice.

  • Providing good customer service. Clear contact information and good, easy to reach customer service will encourage customers to bring any complaints to you before seeking a refund from their bank.

  • Promptly processing cancellation requests. Direct Debit Instruction cancellation requests should be processed immediately to avoid attempting payments on a cancelled mandate.

  • Following the Direct Debit scheme rules. Make sure you and your provider precisely follow the Direct Debit scheme rules - including any updates.

The Direct Debit Guarantee in action at GoCardless

GoCardless helps you manage indemnity claims. If a claim is made by one of your customers we will notify you immediately. We will then work with you and your customer to understand the reason, and retake the payment if appropriate.

The GoCardless processes are designed to minimise the risk of an indemnity claim and to make sure you always abide by the Direct Debit Guarantee and the Direct Debit scheme rules.

These include:

  • Invoices sent in advance for you. Under the GoCardless terms and conditions customers agree to a three day notice period. GoCardless automatically notifies your customers via email 3 working days in advance of a payment.
  • Provide clear contact information and good customer service. GoCardless offers a first stop for customer support helping you to manage any indemnity claims from your customers.
  • Follow the Direct Debit scheme rules. GoCardless keeps up to date with all Direct Debit scheme rules. We precisely follow the rules and help you do the same.

To find out more about collecting Direct Debit payments with GoCardless visit GoCardless.com.

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