Cancelling Direct debit payments - what merchants and payers need to know

In this article, we look at cancelling Direct Debit payments from both the payer’s and the merchant’s perspective.

For payers: to cancel a Direct Debit, contact your bank or building society on the phone, via secure online banking, or visit your local branch. Direct Debit payments can be cancelled anytime, but a bank will require at least 1 day’s notice before your next payment date. 

For merchants: it’s important that you know how to handle cancellations to ensure Direct Debit continues to be a convenient and effective payment method for you and your customers. With GoCardless, merchants are informed of any cancellations and do not need to take further action, as GoCardless takes care of everything on your behalf.

Both the customer and organisation are recommended to have confirmation of the cancellation in a letter or email.

Cancelling Direct Debits - what merchants need to know

1. Customers can cancel a Direct Debit at any time. Your customer can cancel a Direct Debit mandate at any time, either by informing you directly or through their bank. If a customer asks you to cancel a mandate, make sure they also notify their bank.

2. You will be notified of a cancellation by ADDACS message. If your customer asks their bank to cancel a mandate, the bank will do so immediately, and you will be notified of the cancellation by an ADDACs message. For details of ADDACs messages, see our guide to messages from the banks.

3. You must apply cancellations immediately. You must apply any changes immediately or within three working days of receiving an ADDACS message. Make sure you regularly check for reports from the bank.

4. Failure to act can result in an indemnity claim. If you can’t act on the notice of cancellation before the next payment date, your customer may be entitled to make an indemnity claim. You should keep records of any ADDACS messages to respond to any future indemnity claims.

GoCardless helps you to keep on top of any cancellations

GoCardless deals with any cancellations for you by:

• Handling any reports on your behalf. We receive any reports from the bank and use this information to make any updates.

• Immediately cancelling any instructions on receiving a message from your customer

To find out more about how GoCardless can help you with Direct Debit, read more about the benefits of Direct Debit with GoCardless.

Watch the video to understand Direct Debit in under 60-seconds:

FAQs - Cancelling Direct Debit payments

Here we answer the most common questions that both merchants and payers ask in regard to cancelling Direct Debit payments.

Merchant FAQs - Direct Debit cancellation

What happens if a customer cancels their Direct Debit?

Customers can cancel their Direct Debit with their bank at any time. GoCardless merchants are notified by email when a Direct Debit is cancelled.

GoCardless provides good visibility on payment statuses and cancellations, which is important for businesses to be able to make good financial decisions and understand their own cash flow.

When a customer cancels their Direct Debit, what action do I need to take?

As a GoCardless merchant, you will receive a notification, but you do not need to take any action. GoCardless provides a done-for-you service and takes care of all technical and regulatory requirements on your behalf. Cancellations will be applied immediately and you will always be compliant with GoCardless.

Payers FAQs - Direct Debit cancellation

What happens if you cancel a direct debit without the approval of the company?

You are perfectly within your rights to cancel a Direct Debit from your bank account whenever you like. However, if you do not inform the company receiving the funds of the cancellation, depending on the terms of service that you agreed to, you may be liable for a cancellation fee or to pay for the time elapsed between when you cancelled the Direct Debit and when the company closed your account or stopped making the service available to you.

Every company will have different terms and procedures for cancelling payment, so to avoid additional charges, it is best to inform the service provider that you have stopped payment.

Can you just cancel a Direct Debit?

Yes, simply contact your bank and tell them you want to cancel a Direct Debit, and they will be able to do that.

If you have access to online banking, most apps will allow you to cancel Direct Debit payments on your phone, tablet or laptop.

How can I cancel a Direct Debit online?

To cancel a Direct Debit online, you will need to log into any user interface that you have been given access to by the service provider. and you may be able to cancel your account and, therefore, the payment. If you have an online banking app, you can cancel simply by logging in and navigating to the relevant section.

How do I cancel a Direct Debit from my bank account?

To cancel a Direct Debit from your bank account, you will need to contact your bank and ask them to cancel the payment. Alternatively, if you have access to online banking, you can use the app to cancel payments.

Can you cancel Direct Debits on the phone?

Yes, you can cancel Direct Debits on the phone at most banks on the phone. Before doing so, you will have to answer verification questions to prove you are the account holder. 

How do you stop a company from debiting your account?

To stop a company from debiting your account via a Direct Debit, you have authorised you can call the bank and ask them to cancel or use your online banking app (if you have one) to cancel the payment.

If a company debits funds without authorisation or without providing the correct advance notice, the Direct Debit Guarantee ensures that those funds are returned to the consumer.