Direct Debit Regulations
Direct debit has become a routine manner of paying for goods, whether at the cash register or through monthly debits on personal current accounts to pay for utilities and other purchases.
A May 2010 Nilson Report on the prevalence of credit card and direct debit card use found that direct debit and prepaid cards generated £0.93 trillion in transactions in 2009, a 6.8% increase from 2008. The sheer volume of direct debit transactions requires strict regulation to ensure that the needs and responsibilities of both consumers and direct debit handlers are met.
According to Swift, a global provider for financial messaging services, banks participating in direct debit transactions must complete service requests, including requests for a direct debit funds transfer, within the agreed-upon time stated in bank and consumer policies.
Under direct debit regulations, bank customers who have signed up for preauthorized direct debit payments, such as a monthly gym membership or cable bill, should expect their bank to make this payment correctly and on time, according to Ombudsman News, an online financial information resource. Mistakes or errors created after a bank neglects to make a preauthorized direct debit payment must be addressed by the bank.
Direct debit regulations require participating banks to debit the correct amount authorised by bank customers, according to Swift. Banks should also provide written documentation of direct debit transactions.
If banks mistakenly debit payments from a customer's bank account, the customer is entitled to a full, immediate refund, according to Ombudsman News. Further, direct debit customers can cancel direct debit payments at any time by writing to their bank or financial institution.
Under direct debit regulations, consumers are entitled to full disclosure of all procedures related to direct debit transactions, according to Swift. Banks should describe transaction methods, cut-off times for requested debit dates and any reporting obligations for larger debit transactions.