If you have a recurring bill that you need to pay, the two simplest options are either standing order or direct debit. A standing order doesn’t allow for any flexibility or variation, so for most people a direct debit is the best choice.
Direct debits have been around for many decades but still offer one of the best ways to make payment securely. As well as providing the flexibility for merchants to collect the money, there’s also excellent protection for customers.
Here’s more information about how direct debits work and the protection that customers enjoy.
What is a direct debit?
Unlike a standing order where the customer specifies the amount of money being sent, a direct debit puts the merchant in control. The merchant decides how much to debit your account for and what date, so it’s important to only set up a direct debit with someone you trust.
Merchants are not allowed to raid your account for whatever amount they so choose. The direct debit rules specify that they have to give you advance notice of when they’re going to collect the payment, and how much it will be.
This offers merchants the flexibility to collect a different sum every month, without the need to wait for you to approve the request. This makes it an excellent option to pay bills.
What is the Direct Debit Guarantee?
The banking industry keeps a very close eye on the conduct of companies who are participating in the direct debit programme. There is a strict code of conduct that every company is expected to follow, and the penalty for not adhering to these standards is harsh.
Your own building society or bank will provide the protection under what’s known as the Direct Debit Guarantee.
This guarantee means that you are entitled to your money back if the company makes a mistake when debiting your account. You are also protected if they fail to give you 10 days’ notice before attempting to debit your account.
The direct debit guarantee won’t cover you for a refund if you’re in some kind of contractual disagreement with the company; it only provides protection for your money in the event of the direct debit rules not being followed.
Paperless Direct Debits
In the past, the process of setting up a direct debit could be a little onerous as it required the signature on the agreement. This meant the payment took some time to get in place and didn’t always succeed if the individual forgot to return the documentation.
The paperless direct debit scheme was created to make the process smoother, reducing the delays and paperwork while still providing the customer with the same protection.
Even though you don’t have to sign any paperwork to set up a paperless direct debit, the same safeguards for your money are in place. Companies still have the same obligations to provide advance notice of their collection and the amount they’ll be collecting. Many companies opt to record calls as a means of verifying the direct debit sign-up process was legitimate.
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