Errors with Direct Debit References are a common reason for Direct Debit Collections to fail. As a result, it’s a great place to start when troubleshooting problems. Below we have 5 common issues with Direct Debit References, but first – some background!
What is the Direct Debit Reference?
The Direct Debit Reference is chosen by the Service User and is typically a number or a mix of letters and numbers. It is usually between 6 and 18 characters and unique to the payer. Often it is a customer or membership number.
It is a Scheme Rule that all Direct Debits must be set-up using a Reference. This is true whether you send paper Direct Debit Instructions to the bank or submit information electronically. (It is one of the 6 mandatory fields required for each transaction). It will appear on the customers bank statement, to help them identify what the Direct Debit relates to.
Common Issues with Direct Debit References
1. Incorrect format
If you are an AUDDIS Service User (i.e., you send Direct Debit Instructions electronically to Bacs), your references must meet the following criteria:
- minimum of 6 alpha numeric characters,
- maximum of 18 characters long,
- comprised of ‘allowable’ Bacs characters. These comprise alpha characters, numeric characters and other characters including space, ampersand (&), hyphen, full stop and solidus (/).
- unique for the sort code, account number and Service User Number (SUN). This ensures that the paying banks can accurately match Direct Debit collections to Direct Debit Instructions. The core reference quoted in the DDI must not wholly or even part-match the core reference of any other DDI already held by the bank for the same sort code, account number and SUN.
- must not contain “DDIC” in the first four characters. (reserved for use by the banks only)
- must not consist of all the same characters e.g., all zeros or all A’s etc.
Example: There are lots of ways that references can be ‘incorrect’, here are two examples:
- References not long enough.
AUDDIS service Users must use a minimum of 6 alpha-numeric characters in a reference. ‘Other’ characters can be included in the reference, but only alpha and numeric characters will be counted in checking for the minimum length of 6 characters. An example: MOV/12 is 6 characters but only 5 alpha or numeric characters. This would be counted as a 5-character reference. It should therefore be rejected by Bacs. Note: Non-AUDDIS service users can use references that are shorter than 6 characters. It is best practice to follow the requirements above however. You’re less likely to experience issues and if you ever undertake an AUDDIS migration, it will be more straightforward. - References contain unallowable characters.
Disallowed characters for example include @, # and brackets ().
2. Collection reference doesn’t match the Reference lodged on the account
When this happens, the Direct Debit collection will fail. It’s one of the most common errors we see. It can occur for different reasons – here are two examples:
- Mis-keyed data.
For non-AUDDIS services users who post paper DDIs to the bank, it can easily occur when a human at the bank has to re-key the reference to lodge it. An example: it is easy for the human to misread the number 1 as the lowercase letter L, or to misread the number zero as the letter o. If the reference sent in the collection does not match the reference lodged on the account, the collection will be rejected. - Including a long reference when lodging the 0N, instead of just sending the core reference.
Any Direct Debit Collection reference must match the reference lodged on the account completely. Reading from the left, all characters must be present. An example: If you lodge a reference which is ABCD1234 then your collection reference must be ABCD1234. You can then add ‘variable data’ to the collection reference e.g., to make it ABCD1234 -Jan or ABCD1234-Feb for example, but it must always match the reference lodged first. So, if you lodged the reference ABCD1234 -Jan, it must always have this ‘core’ at the start of any collection reference.
3. Dropping leading zeroes
This is a common problem if your references start with a zero! If your system creates Direct Debit files in .csv format for example and staff open these in excel to ‘check’ them, be aware that any data fields with leading zeroes are vulnerable to having the leading zero ‘dropped’. Bacs software wont ‘pad’ references and as Bacs reads References from the left first, the reference won’t match, and it will be rejected.
An example:
You have an 8-character reference such as 00123456. The file is opened in excel and the 2 leading zeroes are stripped out. The reference sent to Bacs will now be 123456. It meets the requirements of being at least 6 characters but the bank, checking from the left, will not find a matching authority on the Payers account and will therefore reject the collection
4. Duplicated reference
Service Users should carefully monitor their systems to ensure that no two Direct Debit customers are allocated the same reference. We have seen this happen a few times – for example when data is held in 2 different databases then manually transferred or when a customer has cancelled, and the reference reallocated.
It can also happen where a reference has been added to a DDI before being sent out for signature and the same reference allocated e.g., by a different staff member to a returned, signed DDI. To avoid this, it is perfectly acceptable to add a reference to the DDI after it has been signed. You should remember however, that if you are storing a copy of the paper DDI, you should add the reference number to it before you save it. You must also ensure that the reference number is quoted on the Advance Notice you provide to the payer
5. Amalgamated collections under one reference
Bacs and the banks all strongly advise against the practice of amalgamating the Direct Debits for different contracts into a single Direct Debit collection. This is because of the problems that tend to occur when the payer wishes to cancel one or some – but not all – of the amounts being paid.
The preferred approach is for service users to preserve a one-to-one relationship between DDIs signed by the payer, DDIs sent to the paying PSPs and Direct Debits to be collected. This is to make it easier for all parties to identify and manage each authority.
An example:
Mobile Phone Company X have 3 contracts with payer John Smith. They want to charge John Smith via Direct Debit for these which are:
- the handset he has purchased.
- the calls that he makes.
- insurance on the handset.
Mobile Phone Company X use 3 separate references for each or 1 reference per contract. John Smith subsequently decides he wants to cancel the insurance, so he calls his bank and cancels the reference for 3). The other 2 References remain live and collections for these elements can continue. If Mobile Phone company X had used one reference and amalgamated the 3 contracts into one collection, John Smith would have cancelled all collections.
Note: If as a Service User you have multiple contracts with a particular customer and wish to collect several Direct Debits from the same bank account, there are different ways these can be structured and referenced.
- You could ask the customer to sign multiple DDIs and allocate a reference to each.
- You could ask the customer to sign one DDI, lodge one core reference and then use ‘variable data’ added to the core reference to distinguish the collections or different parts of the contract. An example: Core reference is ABCD123 whereas collection references are ABCD123-A and ABCD123-B.
- AUDDIS service users are also able ask the customer to sign one DDI, then generate and lodge multiple references as different 0Ns sent to the bank.
If you want to know more about this, best to contact us for us to explain.
Contact us for help
Understanding the requirements around Direct Debit references is incredibly important. It will help you avoid errors and failed collections. This blog contains a brief overview of common issues but if you would like more details or have questions, please contact us and we will be happy to help.