The Direct Debit Guarantee provides a number of safeguards for customers to protect them from payments being taken incorrectly or fraudulently. (It is also known as the “Direct Debit Indemnity”.) In practice, less than 0.2% of payments are charged back.
We've written about the Direct Debit Guarantee in more detail in our Direct Debit Guide but thought it might be useful to explain very briefly what the guarantee is and what it means to you.
How does the Direct Debit Guarantee protect customers
In a nutshell, the Guarantee protects customers in three ways:
- Advance notice. Customers must be told the amount and date of each payment in advance. To help you check whether you are giving Advance Notice correctly we have put together six quick questions for you.
- Immediate refunds. Customers can get a full and immediate refund from their bank (also known as a “chargeback” or “indemnity claim”) for any payment taken in error.
- Instant cancellations. Customers can cancel a Direct Debit at any time through their bank.
Three useful tips to prevent non-fraudulent chargebacks
Provide clear contact information and good customer service. This will encourage customers to channel their complaints to you first, before calling up their bank to request a chargeback.
Send invoices in advance. This gives customers a chance to raise any issues and, if necessary, cancel a payment before it is made.
Follow the Direct Debit scheme rules. Make sure you or your provider precisely follow the rules around mandates and timings.
Minimising the risk of chargebacks with GoCardless
Our processes are designed to minimise the risk of our clients receiving an indemnity claim:
Invoices sent in advance for you. We give your customers three days notice of any payments via email.
Provide clear contact information and good customer service. GoCardless offer a first stop for customer support. We help you to manage any chargeback claims from your customers.
Immediately notify you of any claims. We will notify you of any claims immediately and then work with you and your customer to understand the reason and retake the payment if appropriate.
Follow the Direct Debit scheme rules. GoCardless keep up to date with all Direct Debit scheme rules. We precisely follow all the Direct Debit rules and help you to do the same.