E-Signatures, Electronic Signatures, Paperless Direct Debit (PDD)
12, APR 2021

The use of electronic signatures on Direct Debit Instructions (DDI) has taken off recently. This is due to lock-down issues; difficulty accessing the office to collect and send off paper instructions and a desire to be seen as a modern, up-to-date organisation.

Although electronic signatures are allowed under Direct Debit scheme rules, they are classed as a means of Paperless Direct Debit sign up. Therefore, you must have Paperless approval from your sponsoring bank to be able to use them.

What is an electronic signature?

Electronic signatures have become a means by which documents–primarily contracts-can be signed remotely. Electronic signatures can also be used for Direct Debits, and the Bacs Service User’s Guide and Rules were updated in January 2017 to clarify their use. Electronic signatures can be used as an alternative means of paperless sign-up, mainly where it has been identified that more than one person is required to sign the DDI.

 How do electronic signatures work?

  •  The Service User will communicate with the payer initially either via telephone or on-line. Depending on the method of communication the mandatory requirements will still apply i.e., the use of an approved telephone or internet sign up script must be used.
  • The Service User will send the documentation i.e., contract and DDI for e-signature to the customer. Where it has been identified that more than one person is required to sign this must be sent to all signatories thus providing an audit trail
  • Customer receives an electronic message with a link to the documentation.
  • Customer accesses the link and reviews the documentation online and e-signs to confirm the information is correct.
  • The Service User then receives the original e-signed documentation (contract and DDI) via electronic means.
  • The Service User processes the DDI as usual and lodges with the paying bank using AUDDIS.

How many types of electronic signatures are there?

There are three types of electronic signatures:

  •  Simple
  • Qualified
  • Advanced

A simple electronic signature could be a name at the bottom of an email address, ticking I agreeon a website or electronic device, a scanned image of signature or the use of a stylus on a touch screen device. Qualified or advanced signatures are often provided by a third party who creates the electronic signature on behalf of the signatory using a method of certification. Electronic signatures can only be provided by individuals and not corporate organisations (corporate organisations should use an electronic seal).

Existing Paperless Service Users

When a Service User applies for Paperless (PDD), as part of the application form you must declare which sign up methods you will be using, i.e., internet, telephone, face to face or e signatures. If you have only been approved for one of these it does not automatically mean you can use others – i.e., if you are approved for paperless sign up using the telephone, it does not mean you can automatically use e-sign. If you wish to use e-sign, you can only do so after you have applied and gained approval from your sponsoring bank. There is an application process you must go through to do this.

AUDDIS Service Users

If you are an AUDDIS Service User, (you submit files to Bacs electronically to set up new DD authorities), but are not enabled for Paperless Direct Debit you should could continue to collect Direct Debit Instructions using a paper DDi. The Bacs rules say that when using Paper DDi’s they must be signed using a “wet signature” as it must match the signature held at the bank. You can send the DDi to the payer electronically i.e., via email, and the payer can then print out the DDi to sign it, scan the completed form and send it back to you via email or via post. It is important to check your completed DDi’s when they are returned to you, to make sure they have been completed using “pen to paper”. Remember: you need to also be enabled for Paperless Direct Debits to be able to accept electronic signature on DDi’s. This is an area where many organisations can become confused about whether they are allowed to do so please do ask us if you are unsure.

If you are considering moving to Paperless and need assistance from an expert then we can supply Consultancy and Direct Debit Scheme Training which can help. Alternatively, if you have questions you can get in touch with the team on 01737 826957 or