One of the cornerstones of the Direct Debit Scheme is the obligation that Service Users have to provide a payer with Advance Notice. It acts as a reassurance that the payer will be told about any money being removed from their account. The Payer must be told an agreed amount of time before money is taken. This is the Advance Notice Period.
How is Advance Notice provided?
Advance Notice can be provided in a variety of forms. These include a letter to the account holder, an email, invoice or statement. The Bacs Scheme Rules state that it must be “clear and unambiguous”. By this, Bacs mean that it must be easily identified “at first glance by the payer”. It must be provided “before the first Direct Debit is collected” and “if there is any change to the amount or date”. For many organisations (e.g. those who are collecting different amounts each time) this will mean providing Notice each time a collection is made.
How long is the Advance Notice period?
When first taking out a Service user Number (SUN) an organisation will be asked to confirm the number of days Advance Notice that they will provide. The default period – if not amended by the organisation – is 10 working days. This means that the payer must be told a minimum of 10 working days before a collection is taken. Some organisations choose to have a reduced Advance Notice period and may ask for as few as 3 working days. It will then be for the sponsoring bank to decide whether to approve this figure. Note: If you are unsure what the Advance Notice period is for your organisation you should be able to see this within the Direct Debit Guarantee.
Can the Notice period be changed?
We are often asked if it is possible to reduce the Direct Debit Advance Notice period. The answer is yes, it is!
What are the benefits of a shorter Notice period?
There are various scenarios when a shorter notification timeline is beneficial. Two examples
- If your organisation collects payment for goods in advance of providing the goods. In this scenario, a short notice period could be advantageous for both the collecting organisation and the payer. It allows quicker collection of the amount owed. In turn, this enables quicker delivery of the goods required.
- If the organisation needs to compile usage of goods or services in a given time period to calculate the Direct Debit amount to be collected. Assume for example that an organisation collects Direct Debits on the 15th of every month. If they are obligated to provide 10 days Advance Notice, there would only be a few days at the start of the month to calculate the amount due. If the organisation is required to give 3 days Advance Notice they would have longer to calculate the amount. In turn this could remove administrative pressure for the team.
These are only 2 examples of where a short Advance Notice period is beneficial. Others could apply.
What’s involved in making the change?
If you do wish to reduce your Advance Notice period, there are a few steps involved. Firstly, you would need to ask your sponsoring bank if they are willing to allow you to change your notice period. Not all banks will support a notice period shorter than the default 10 days. If the bank do agree, you will need to update your Direct Debit Guarantee and other literature with the revised number of days. Internal processes will need to be reviewed to ensure they align with the new timeline. Likewise, software configurations may need amending (e.g. those that enforce a wait period after notice is sent). Staff may need training on any new processes and the possible implications and impact. You will also need to advise existing payers of the change – though if you are providing Advance Notice before every Direct Debit collection anyway, this could be easily incorporated into the communication.
In deciding if this is a beneficial task to undertake it is worth considering all the above factors. If other changes are being implemented – for example, a Bulk Change – then it could be the right time to also amend your Notice period. Remember, you can provide a greater notice period – this is the minimum requirement only.
Interested to learn more?
If you are considering making changes to your Direct Debit processes and want to discuss all the possible benefits and implications, please reach out and contact us today. We are here to help.