A Direct Debit Indemnity Claim (DDIC) is raised against a Service User by a Paying PSP (bank). The Service User must decide whether to challenge it. If they choose to raise a Direct Debit Indemnity Claim Challenge, they need to follow the challenge process. This is described by Bacs, part of Pay.UK, in ‘The Services Users Guide and Rules to the Direct Debit Scheme’.
What is a Direct Debit Indemnity Claim?
If a payer believes an error has been made in the collection of their Direct Debit, they can ask their bank for a refund. If their bank assesses their request and believes it to be valid, the bank will refund the payer – as per the Direct Debit Guarantee. The bank, now out of pocket, will decide who created the error identified. If they believe it was the Service User, the bank will raise an ‘Indemnity claim’ against the Service User to recover the money they refunded to the payer. The Service User can either accept the Indemnity Claim – in which case, the money will be taken from their bank account – or they can challenge the claim if they have valid reason.
What is changing and why?
The process by which Service Users raise a Direct Debit Indemnity Claim Challenge is being altered.
- Previously: If the Service User wanted to raise a challenge, they would follow the process as dictated by the Paying bank. This meant that claims raised by 2 different banks on the same day could need to be dealt with differently – depending on the processes each bank had in place. Many Service Users found this confusing.
- Now: Service users will be able to log into Payment Services Website (PSW) to raise the challenge. They will do this by clicking on the new ‘challenge’ button. This will ensure one process for all challenges. It will also keep an electronic audit trail.
When will the new Direct Debit Indemnity Claim Challenge process start?
- The new approach (where challenges are made via Payment Services Website / PSW), will start on March 4th 2024.
- Initially it will run in parallel with the old process (where challenges were made via email to the bank).
- From Friday May 31st 2024 however, the old process will be closed and challenges will only be possible via PSW.
Who can use the new process?
The relevant permissions to allow Service Users to raise a challenge via PSW will be automatically assigned to Primary Security Contacts (PSCs) by their sponsoring bank. These PSCs can then allocate the correct privileges to Additional Security Contacts (ASMs) if required.
How will I get notified about Indemnity Claims going forward?
The way in which Service Users are advised of DDIC’s is not changing. Advice about an Indemnity Claim will continue to be made via the Bacs Reports. These reports are available through either PSW, Bacs Approved software or via Bacs Approved Bureaux
How long do I have to raise a challenge?
The day that an Indemnity Claim is raised (and a report made available for Service Users) is counted as working day one. If the Service User wishes to raise a Direct Debit Indemnity Claim Challenge, they must do so before the end of working day nine.
How do Service Users raise a challenge?
Once logged in to PSW, Service Users will navigate to the “DDIC Challenge” page via the left-hand menu. They can search for DDIC Information and select a DDIC to review. If they wish to challenge the Indemnity Claim they can choose the basis upon which they want to challenge it from possible challenge reasons in a drop down list.
Service Users can attach up to 5 pieces of ‘evidence’ to support the challenge (e.g. a copy of the Direct Debit Instruction or an Advance Notice). Contacts can then submit the challenge using their given authentication approach – i.e. via username and password or via smartcard. Contacts can be given permission to raise the challenge themselves or alternatively, the challenge could require a second approval.
What happens once a challenge has been raised?
Once a challenge has been raised the paying bank will review the challenge and either accept or reject it. The status of the challenge will be updated on the DDIC Challenge tab and can also be emailed to contacts if this option is enabled.
- If the challenge is accepted, the DDIC will be cancelled.
- If the challenge is rejected, the reason for the rejection will be entered and Service Users can either relodge the challenge (until day 9) or accept the DDIC.
Any DDIC that is neither accepted nor challenged at the end of working day nine (the challenge cut-off) is auto accepted. Any challenged DDIC that is not accepted or rejected by the bank at the end of working day eleven (the response cut-off) will be automatically cancelled
Can this approach be used to raise an Indemnity Claim on behalf of a payer?
Yes! This approach can be used if a payer contacts the Service User directly to request a refund. Previously, the Service User may have referred the payer to their bank to request a refund under the Direct Debit Guarantee. This can still be done. Now however, Service Users can also raise an Indemnity Claim for the payer via PSW. Once logged in to PSW, contacts would navigate to the area named “DDIC Reason Code 7” and enter relevant details. It will be possible to enter details for up to 12 Direct Debits per payer.
What information / Bacs Reports are available?
There are Bacs Reports which will be available to Service Users. These can be accessed via PSW and are described below.
- Direct Debit Indemnity Claim Monthly Challenge and Response Report. This provides an overview of DDICs raised against the Service User in the previous month. It details the number of DDIC advices produced, challenged, accepted, and rejected. It is available in XML / HTML format.
- Direct Debit Indemnity Claim Challenge and Response Audit Report. This provides details of any challenged DDIC’s and lists any actions taken, e.g. if the challenge was accepted, rejected, relodged and accepted etc. This is an ad hoc report, produced within 15 minutes of the request.
- Direct Debit Indemnity Claim Service User In Progress Challenge and Response Report. This provides details of DDICs which have been challenged, with the status of the challenge.
- Direct Debit Indemnity Claim Service User In Progress Reason Code 7 Requests Report. This provides details of DDIC requests raised by a Service User using DDIC reason code 7. This is an ad hoc report that is produced within 15 minutes of the request.
Still got Questions?
If you have questions about the Direct Debit Indemnity Claim process or the Challenge Process, please contact us. We will be happy to help!