The Direct Debit Advance Notice is one of the Cornerstones of the Direct Debit Scheme. It provides reassurance to payers that money will only be collected from their account after they have first been informed. Given its importance, (and the fact that it’s a mandatory requirement of the scheme), Service Users should be aware of the relevant Bacs Scheme Rules.
What is an Advance Notice?
Bacs define the Advance Notice as
“the method by which service users give notice to the payer before the first Direct Debit is collected and following any changes to the Direct Debit collection in respect of amount, Direct Debit due date and / or frequency”.
What should the Notice include?
The following are mandatory inclusions:
- The total amount of the Direct Debit to be applied to the payer’s account. Note: If this is an amalgamation of more than one collection, the amount of each collection must also be shown as well as the total. This is to help the payer recognise the amounts due.
- Direct Debit due date (include date, month and year). This could alternatively be “first of the month” or “last working day of the month” etc, as long as its obvious.
- Frequency of Direct Debit collection (if relevant, i.e. if you plan to collect the same amount on the same date every month).
- Direct Debit reference. This helps the payer identify the collection.
- Advance notice period if it is the first / initial notification (optional for subsequent notifications).
- Service user name and contact details – telephone number or email address so the payer can contact you with any queries. (If they can’t reach you they will likely cancel the authority at their bank)
When should it be sent?
- The first Advance Notice must be provided “before the first Direct Debit is collected”.
- Subsequent notices must be provided if there is any change to the amount, due date and / or frequency.
It should be provided as per the notice period agreed with the sponsoring bank. The default period (the time allowed for receipt of the advance notice by the payer) is a minimum of 10 working days plus postal time (if sent in the mail). It could be different for different Service Users however. The agreed number of days should be contained within the Direct Debit Guarantee.
Where should it be sent?
This is key! The notice must be issued to the Direct Debit payer. Note – Where the payer is paying on behalf of another person or party, the notice must be issued to the Direct Debit payer, i.e. the person who signed the DDI
How should the Advance Notice be provided?
The Bacs rule state the Notice…
“must be a clear and unambiguous personalised advice and must be identified as such at first glance by the payer”.
It should not be included within marketing material that could be overlooked or discarded. Bacs further expand on this to say that the information should be “given precedence over other material” if other (non-related information) is included with it.
It can be given in written or electronic form. This could be for example as a letter, a schedule, an invoice or a statement. It could be posted or provided electronically via email. It could also be provided on a secure website (if previously agreed; if in durable format such as an invoice and if the payer is advised each time of it being placed there). It can also be issued orally subject to restrictions (i.e. if for a one-off collection not for a schedule of collections).
Can the Direct Debit be collected before the date specified?
No! A key rule of the Direct Debit Scheme is that “Service users must collect the Direct Debit on or within 3 working days after the specified due date as advised to the payer on the advance notice”. Direct Debits should not be collected before the date specified. You can read more about the Bacs Cycle in our Blog.
Are there risks of not complying?
Not providing Advance Notice introduces risks including:
- Customer (Payer) unhappiness
- A negative impact on company image
- Greater chance of failed collections i.e. if funds are unavailable or the payer disputes the Advance notice and asks for it be returned unpaid (advised via the ARUDD report)
- Increased risk of Indemnity claims (and the associated admin that accompanies dealing with these) if the payer requests their money back using the Direct Debit Guarantee
- Less chance of successfully challenging Indemnity Claims
- Higher chance of cancelled Direct Debit Authorities (advised via ADDACS reports)
Still got Questions?
We hope this provides a good overview but if you have questions, or would like to review if your documents are compliant with scheme rules, please contact us. We will be happy to help!