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for those short changed by a personal finance product
     
  direct debits-the official line  
   
 

This is the banks' official summary of the direct debits scheme, taken from within the frames of the site of the Association for Payment Clearing Services.

I reproduce it here to save you clicking time.

Our comments on the direct debit scheme are here.
 
 

What is a Direct Debit?

A direct debit is an authority you give to your bank or building society to make regular payments from a current account at the request of, and to the account of, a specified organisation.
 
 

Who Benefits?

Direct debits allow you, as a bank or building society customer, to pay bills easily and conveniently, saving the time and trouble of writing and sending a cheque, or paying in cash. They can be used to pay regular bills as well as to spread a larger bill in instalments across a period of time. Originators find direct debits easy and convenient to use in much the same way as customers. Direct debits make cash flow easier to manage because businesses know exactly when cash is flowing in and out of their accounts.
 
 

Direct Debit History

The Direct Debit Scheme started with paper claims in 1967. The scheme is managed by BACS Limited, the UK's automated clearing house, under the umbrella of APACS. The use of direct debits has grown rapidly in recent years and in 1997 nearly 1.6 billion payments were made this way, an increase of 9.6% from the year before. APACS forecasts that payments made by direct debit will more than double over the next ten years.
 
 

Can all Companies Offer Their Customers Direct Debits?

The organisations able to make direct debits are known as originators. They must meet the approval of a major bank or building society before they are allowed access to the Direct Debit Scheme. They only have authority to collect amounts authorised by the customer and only on or after a specified and pre-notified date, which forms part of the Direct Debit Guarantee by which they are bound.
 
 

How are Direct Debits Processed?

Direct debits are processed by BACS within a three-day clearing cycle:

Day One - The company or originator (see above) wishing to make the direct debit sends BACS a computerised listing of the bank account, amount and other details of the customers who are to be debited. This information can be sent direct to BACS electronically via a telecommunications link. Alternatively, it can be sent through the originator's bank or via computer bureau. Details have to be received by BACS by 9pm. Over the next few hours the information is processed by BACS (in essence this is a huge computerised sorting operation).

Day Two - Very early in the morning, details of the direct debits (and other transactions processed by BACS - direct credits and standing orders) are passed to BACS Member banks and building societies, providing each with a complete list of all their customers' accounts which have to be debited (or credited).

Day Three - The direct debit payers' accounts are debited and the account of the originator is credited simultaneously. The BACS Member banks and building societies settle the values of the transactions across their accounts at the Bank of England.

 
 

Variable Direct Debits
Direct Debit Instructions allow for variable amounts to be debited from the customer's account. They are used for amounts that cannot be forecast in advance as with telephone and utility bills. Also, for amounts that only change annually, e.g. council tax and general insurance premiums. With a variable direct debit the originator must provide enough advance notice of the amounts and dates of payment, or any changes to them, in sufficient time to allow the customer to raise any queries prior to payment. This is defined as at least ten working days from receiving the notification. All new direct debits must be variable and in practice the vast majority of existing direct debits are in variable format.
 
 

Direct Debit Guarantee

Under the rules of the Direct Debit Scheme, should any money be taken in error, then the customer's bank or building society must, on request, make an immediate refund to the customer's account. This is the Direct Debit Guarantee. This covers situations where the originator has not given the required advance notice regarding a change of amount or date. It also protects customers should an incorrect amount be debited or if a debit occurs earlier than the specified, agreed date, or in error.
 
 

Cancelling a Direct Debit

A direct debit can be cancelled at any time by the customer informing their bank or building society, usually in writing. It is also advisable to inform the supplier as well, but this is not obligatory as the bank or building society will also do it.
 
 

Key Things to Remember When Using a Direct Debit

If there is not enough money in a customer's account to cover the direct debit claim, it may be returned unpaid. Banks or building societies may make a charge when this happens. The customer should make arrangements to fund the account against the possible re-presentation of the direct debit or get in touch with the originator and make other arrangements for payment. If a customer changes their bank or building society account, a new direct debit authority will have to be given for each direct debit and the old ones cancelled.
 
 

The Future

Direct debits are fast becoming the preferred way to pay regular bills. Two-thirds of households in the UK now use them and APACS research suggests their usage is likely to double over the next decade. A new service allowing Direct Debit Instructions to be set up by telephone has recently been introduced. New markets continue to be an important source of growth in direct debits. For instance, last year around 40 million direct debits arose from the payment of mobile phone bills.

This is the summary of the direct debit scheme written by the banks' own body.

Our main page about direct debits is here, including knowing your rights. There is a page about paperless direct debits here.
 
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