Direct Debits: “With great power comes great responsibility”

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Direct Debits – “With great power comes great responsibility

Whether it was Voltaire or Spiderman’s Uncle Ben who is best known for this phrase does not matter – the phrase is however pertinent when it comes to the topic of direct debits. Being entrusted to pull money from a client’s bank account is no small thing!

The underlying basis for direct debit transactions is trust. When a client enters into a direct debit arrangement with a service provider such as their accountant, they trust that the provider will only debit the agreed amounts at the agreed frequency such as weekly or monthly.  These clients will rightly assume that their provider is complying with the regulations and procedures that apply to such transactions.

Direct debits are administered by the Australian Payments Network through the Bulk Electronic Clearing System (BECS). There are more than 200 pages of regulations and procedures that set out what is required to be compliant

Some key obligations:

  • Provide the client with a bank approved Direct Debit Request (DDR)
  • Provide the client with a bank approved DDR Service Agreement (DDR SA)
  • Verify that the person/s signing the DDR are authorised to do so
  • The DDR must show the name of the provider, their address and bank provided User ID
  • The client must know for what services the amounts are being direct debited
  • The signed DDR must be kept and retrievable (on 3 days’ notice) for at least 7 years after the last direct debit was processed

If this sounds all too hard then it need not be!

There are a number of companies that can stand in the middle of your Direct Debit arrangements and in theory take some of this regulatory burden away. These arrangements usually require the client to enter into an arrangement with a third-party processor which might complicate the relationship in situations where there is dispute or issue which results in a challenge or chargeback. They can also be quite costly.

The good news for FeeSynergy clients is they can leverage the technology now available in the FeeSynergy Collect debtor management platform. Our recently released Direct Debit Module enables users to easily set up and manage direct debit arrangements in a compliant way whilst importantly maintaining the direct relationship with the client.

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