Before you can collect payment by BECS Direct Debit, your must receive authorisation from your customer through a Direct Debit Request (DDR).
What is a Direct Debit Request?
A Direct Debit request (DDR) is an authorisation from your customer to collect future payments from their bank account. Details of each authorisation are standardised and must include the following information:
Future payments are authorised so you can collect set or variable amounts from your customer.
The User ID number of the Debit User
The BSB number, account number and account name of the customer
The terms and conditions of the Direct Debit Service Agreement
No matter how the Direct Debit request is collected, the customer must be provided with a Service Agreement stating the terms and conditions of the request. More details are here.
How to set up a Direct Debit Request
To set up a Direct Debit request, your customer must complete a request form. This happens in one of three ways:
Paper - your customer completes a paper Direct Debit request form and returns it to you.
Phone - you can collect customer details over the phone, using a bank-approved script.
Online - you can collect customer details online, using bank-approved payment pages.
Paper Direct Debit Requests
Paper Direct Debit request forms have a number of mandatory details that need to be included on each request.
The BECS procedures provides full details, and is available from your bank.
Your bank will need to approve all request forms before you use them with your customers.
Once a paper request form has been completed and returned to you, it should be retained as proof that your customer has authorised a Direct Debit payment.
It’s advisable to work closely with your sponsor bank to make sure your Direct Debit request form complies with the Direct Debit scheme requirements.
Phone and Online Direct Debit Requests
Creating Direct Debit requests by phone and online requires special approval from your bank, which needs to sign off on all information sent to your customers.
Once your bank gives approval, you’ll need to set up procedures for identifying customers and for them to access your service each time they initiate a payment.
Once payment information and approval have been collected from your customer, you must retain the information from the request.
For online Direct Debit requests, the Service Agreement should be included in the form that each customer completes. For phone Direct Debit requests, you must send the Service Agreement to the customer in writing within 7 days of the request being collected.
There is no physical copy of the request to retain, which can make proving authorisation harder if the customer disputes it in the future.
Managing your Direct Debit Requests
Each request must include the customer’s BSB number, account number and account name. You must verify that all the necessary account details have been entered and that the BSB given is genuine and current.
Once a Direct Debit payment is set up, you must keep evidence of the authorisation to debit the customer bank account. You can cancel the Direct Debit by informing the bank, and your customer can also cancel it through their bank.
If you wish to cancel the Direct Debit request without the customer asking you to do so, you’ll need to let your customer know about the cancellation at least 14 days in advance.
Your bank will send you a message whenever there are changes to your Direct Debit requests (for example, if a customer cancels their request or changes their account details). The customer’s bank will forward the information to your sponsor bank, which will pass it on to you.
The Debit User must keep all Direct Debit requests for at least seven years after the last collection is made.
Direct Debit Request Service Agreement
Each time a request is set up, you must provide the customer with a Service Agreement.
For paper and online requests, the Service Agreement is generally included in the form that each customer completes. For phone requests, the Service Agreement must be sent in writing within 7 days of the request being collected.
While the layout and format of the Service Agreement is flexible, it must do the following:
It must be clearly identifiable as the Service Agreement
It must set out the details of the terms of the debit arrangement between the customer and the Debit User, including when the Debit User will issue billing advice notices to the customer
Allow for at least 14 days’ notice to the customer if the Debit User changes any terms of the Service Agreement or the debit arrangement.
Tell the customer how they can request the deferral of a payment or any alteration to their payments, including cancelling a Direct Debit request. You must allow the customer to stop or cancel a Direct Debit payment by contacting the Debit User or their bank.
Provide information on how the customer can dispute a payment, either by contacting the Debit User or their bank.
Indicate that Direct Debit may not be available for all bank accounts and that the customer should check their account details on a recent bank statement.
Explain that it’s the responsibility of the customer to have sufficient clear funds in the nominated account by the Direct Debit payment due date
Explain that if the due date for a payment is not a business day and the customer is not sure which day the payment will be taken, the customer should contact their bank.
Outline the policy when a payment fails and if the customer will be liable for any related fees.
Outline the data protection and confidentiality policy relating to customer data.
Payment terms must be included in the Service Agreement. Depending on the service provided, this could be a fixed amount taken at set intervals, or variable amounts depending on the bill.
Either way, you need to make this clear to your customer from the beginning. If payments are variable (either in amount or date), you should provide customers with a billing advice notice before taking the payment.
You should encourage your customers to keep a copy of the Service Agreement for their records.
Direct Debit Requests through GoCardless
With GoCardless, your customers can easily create new requests online. This includes the following benefits:
Optimised customer setup flow, with simple online payment pages which you can brand according to your business needs
GoCardless handles setup and submission of payment requests to the bank on your behalf
With GoCardless, Direct Debit request management is automated in response to messages from the bank
You don’t have to collect or store any documents or the request itself, as we look after everything for you.