Why Has My Direct Debit Been Returned?

Before looking into the question of whether a failed direct debit will be tried again, it’s probably worth looking at the question of why a returned direct debit might have happened and what the person expecting the payment can do about it. After we’ve examined the reasons why direct debits tend to fail, we’ll explain exactly how GoCardless can help your business to deal with the problem.   

When a direct debit fails, the intended recipient will receive an Automated Return of Unpaid Direct Debits Service (ARUDD) notification from Bacs. This notification will include a reason code which explains exactly why the direct debit payment request has been returned. There are 12 reason codes in all, with each number corresponding to a specific cause and enabling the merchant in question to contact the customer in question and take the action needed to resolve the issue.

The 12 ARUDD reason codes for a returned direct debit

1. Refer to payer

This happens when the bank of the customer isn’t in a position to pay the direct debit. In most cases this will be because there are insufficient funds in the account to cover the amount being asked for. 

2. Instruction cancelled

This happens when the customer or the bank they use has cancelled the direct debit instruction.

3.  Payer deceased

This happens when the person who set the direct debit up has died.

4. Account transferred

This happens when the account in question has been moved to a new bank or building society.

5. Advance notice disputed

This happens when the payer is disputing the timing, amount or frequency of the direct debit instruction and is asking for it not to be paid.

6. No account or wrong account type

This happens when the account number associated with the direct debit instruction isn’t recognised by the bank.

7. No instruction

This happens when there are no direct debit instructions on file for the account in question.

8. Amount differs

This happens when the payer states that the amount being asked for is different to what they were expecting.

9. Amount not yet due

This happens when the customer thinks that the attempted date of collection is ahead of the agreed date.

10. Presentation overdue

This happens when the customer feels that the collection date is three days later than agreed. 

11. Service user number differs

This happens when the identity of the company attempting to collect the payment is different from the identity noted on the direct debit instruction.

12. Account closed

This happens when the account in question is closed.

No matter what the reason is, if direct debits are returned it can have a hugely negative impact on your business. It will disrupt your cash flow and create more work for your finance team.

GoCardless and returned direct debits

The good news for merchants is that working with GoCardless makes it easier to deal with returned direct debits. We offer Success+, an intelligent retries product which tries again after a direct debit fails. The system automatically retries on what is the best day for each customer, based on the reason for failure – we look at the two most common reasons here. Success+ collects, on average, 76% of payments that initially fail, allowing your business to reduce the problems caused by failed direct debits and increase the efficiency of a pull-based payment like that offered by direct debit through GoCardless.

We can help

If you’re interested in finding out more about returned direct debits, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments