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How Long Should I Store Direct Debit Instructions?

Direct debit allows a business to receive payment directly from a customer’s bank account. To do so, merchants must request customers complete a form, a Direct Debit instruction (DDI), authorising their financial institution to make the payment. DDIs can be completed online or in paper format.

For online submission, the Automated Direct Debit Instructions Service (AUDDIS) allows DDIs to be sent to customers’ financial institutions electronically. These are known as Paperless Direct Debits (PDD) and are generally faster and more efficient. However, paper DDIs are also an option if time is not an issue. If you choose to file a paper DDI, be sure to save a copy of the document.

But once you’ve received a Direct Debit instruction, what do you do with it? Should it be stored indefinitely, or disposed of? Find out everything you need to know about Direct Debit instructions with our simple guide.

How to set up a direct debit instruction

DDIs can be filed in several ways: businesses can send a paper DDI to a customer’s bank or Payment Service Provider (PSP) by post; they can send a paper DDI electronically, or; they can send a paperless DDI through AUDDIS. Either way, an electronic or hard copy of the DDI should be saved.

Once a DDI has been filed, businesses are required to give Advance Notice of payment, which is typically 10 days prior to the Direct Debit transaction. The customer’s bank is then required to use the Bacs three day cycle to process the request.

How to cancel a direct debit instruction

Customers can cancel Direct Debit in several ways as well: by contacting the bank or PSP by phone, through online banking or in person. It’s important for business owners to handle cancellations promptly when a customer wishes to cancel Direct Debit to maintain positive customer relations and avoid cases of indemnity.

How long should you store a Direct Debit instruction?

The answer to this question varies, since the Direct Debit Guarantee affords customers the right to request a refund at any time. Due to the possibility of such cases of indemnity, it’s wise to store DDIs beyond the end of a contract. Without proof of a valid DDI, a business or organisation will be unable to file a counterclaim in indemnity cases. Take into consideration the inherent risk within your business sector when making decisions on storing DDIs. This may also be a good reason to go paperless; storage of electronic files is much less cumbersome since it requires no physical space.

Bottom line: at minimum, store DDIs as long as the contract between you and your customer exists. This should be the standard process to follow, regardless of whether the contract lasts for one day or 75 years. In many cases, businesses choose to retain Direct Debit instructions for longer than the length of the contract, and if you want to be on the safe side, this is definitely the avenue to go down.

GoCardless and Direct Debit

GoCardless can process Direct Debit payments on behalf of other organisations and businesses. If you’d like to learn more about GoCardless and Direct Debit – as well as our collection process management tools more generally – why not take a look at our comprehensive guide to Direct Debit, right here.

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