Direct Debit Indemnity Claims | Access PaySuite (2024)

• What is an Indemnity Claim?
• How do Indemnity Claims work?
• How long do claims take?
• What is a Direct Debit Guarantee?
• How to reduce Direct Debit Indemnity Claims?
• What evidence can I provide to reduce a claim?
• Indemnity Claim FAQs

What is an Indemnity Claim?

A Direct Debit Indemnity Claim is the method by which a payer can reclaim their Direct Debit payment back under the Direct Debit Guarantee. The bank is obliged to offer an immediate refund in the event that a Direct Debit has been taken in error or without authority. This refund is then claimed back out of the Service User’s (your) bank account.

The Service User can challenge or raise a counter-claim within 14 working days if they can provide evidence that the Direct Debit was legitimately taken within the framework of the BACs Guide and Rules.

How do Indemnity Claims work?

It's a good idea to get an understanding of how it all works from the payee's point of view.

Direct debit Indemnity Claims process

1. The payer realises an error with a Direct Debit
2. The payer reaches out to their bank and it will be investigated as per the Direct Debit Guarantee
3. The bank looks into the claim to check if it's legitimate
4. If it's valid, then the bank will refund the payee
5. The bank will raise an indemnity claim against the service user (you the business), known as a Direct Debit Indemnity Claim Advice (DDICA) report.

Once this happens, it will be up to you to reconcile the payment. At PaySuite, we can help take out the leg work and do this whole process for you, as well as a suite of other payment solutions to make doing business a breeze. Get in touch with us today to see how we can help you with all your payments.

How long do claims take?

Indemnity claims are usually collected within 14 days. The service user has 9 days in which to dispute the claim. If, after 14 days, the paying bank has not heard from the service user (or if a claim challenge has been unsuccessful), it will reclaim the amount refunded to the payer from the service user.

What is a Direct Debit Guarantee?

Essentially it's a protection for customers for any payment errors. If you as a business accept instructions to pay direct debits, you are entitled to offer your customers a direct debit guarantee. This means that if there are any errors in payments, you (the bank or building society) must pay the customer a full and immediate refund; browse our guide on ‘What is the Direct Debit Guarantee?’ to find out more.

How to reduce Direct Debit Indemnity Claims

There are many ways in which you can reduce your Indemnity Claims.

1. Make sure your customers understand payment terms

You can avoid claims by ensuring your customers are clear on when they will be charged for your services. Make your recurring payments remain at the same time and for an agreed amount to avoid any disputes.

2. Making a counterclaim or raising a challenge

You can challenge an indemnity claim received from a paying PSP prior to the settlement of a claim or by a counterclaim that is made following the refund to the payer. Sometimes you will be required to provide evidence before the refund is issued.

Indemnity Claim Rules changed back in 2017 to allow greater scope for Service Users to challenge or counter-claim indemnity claims. A key addition was where the payer who was disputing having been given authority, previously could only be challenged if the Service User has a signed mandate as proof of authority being given.

This was expanded to allow a Counter Claim if there is evidence of a contract either signed by the payer, or where the payer does not dispute the existence of the contract, referring to payment by Direct Debit.

3. Know the rules

Learn the Direct Debit rules and guidelines as outlined by BACS in regards to supporting evidence should you need to challenge or counter an indemnity claim. As you only have 9 days to dispute a claim as a service provider it's important to be prepared. A customer is well within their rights to raise an indemnity under the Direct Debit Guarantee, so making sure you are following the rules can help to reduce any future claims.

4. Be easy to contact

If you can talk to your customers before they dispute a payment then there may not be any need for a claim to arise in the first place. Make sure all your details are easily found online and in any correspondence.

5. Don't double up

From time to time there might be a situation where your business provides a refund and the customer also seeks a refund from their bank which in turn raises an indemnity claim. Make sure you talk to your customer to ensure they understand the process.

What evidence can I provide to counter claim?

It'll make your life a whole lot easier if you have records of all correspondence with your customers. Call recordings, emails, and contracts are all kept online in a CRM or accounting system to make it easy to check if any errors have occurred.

It's a good idea to make sure you have:

• Evidence of a signed contract by the payer which references payment by Direct Debit. You don't actually need it signed if the payer is disputing the payment method and not the contract.
• Evidence that an advanced notice was sent detailing what will appear on the customer’s bank including date, amount, and schedule.
• If paperless, use phone recordings or web data if it was paid online