The Indemnity Claim is a core part of the Direct Debit Scheme. Under the Direct Debit Guarantee, a Service User must agree to the Indemnity Claim process.
If a customer believes that an error has been made with their collection, they can request a full and immediate refund from their paying bank or building society.
There is no time limit on this, a customer can request this at any time but must raise it for the full amount of the payment. Under the Direct Debit Guarantee, the bank is required to refund the payer.
This next step is where the Indemnity claim comes in. If the error was made by the Service User, the bank will use the Indemnity Claim process to reclaim the refunded amount from the Service User.
Usually, Indemnity Claims are collected automatically after 14 days unless they are challenged.
If the error is due to the bank, the bank may raise a refund request which you, the Service User, can choose to settle – however, they are not obligated to.
What happens if a Direct Debit Indemnity Claim error is made by your organisation?
After refunding the customer, the bank can trigger the Indemnity Claim process to automatically claim the refunded amount back from you, the collecting Service User. This means you will not receive the payment from the customer and will also need to pay the full amount to the bank.
Depending on the reason, you may be able to contact the payer to arrange collection at another time.
What happens if a Direct Debit Indemnity Claim error is made by the bank?
After refunding the customer, the bank can raise a request for you to refund them this amount. You are under no obligation to do so.
You can:
- Refuse to settle the request
- Settle part of the request
- Settle the whole amount
How can I see Direct Debit Indemnity Claims?
The DDICA (The Direct Debit Indemnity Claim Advice Report) will advise you of Indemnity Claims that have been raised.
When can I challenge a Direct Debit Indemnity Claim?
You have nine days to challenge an Indemnity Claim from when the bank raises it.
In addition, you have 14 working days from the amount being sent to the bank to raise a counterclaim, depending on the reason code. The paying bank will consider any counterclaim and act within 90 days to settle or dismiss.
What if the Direct Debit Indemnity Claim is not valid?
We can’t guarantee that a false claim won’t be raised, but the system of checking is robust and can be expected to prevent any invalid claims. It’s there to protect the Service User as much as the Payer.
Challenging a claim and counterclaiming are not the only routes open to the Service User. You may often be better off pursuing the Payer directly if a contract is in place and monies are owed. Direct Debit is purely a method of payment and does not affect the underlying contract between the Service User and their customer.
How do I get help in managing a Direct Debit Indemnity Claim?
Indemnity Claims can be tricky to negotiate, especially if you have never dealt with one before. If you need further assistance, there are two main ways we can help. ClearDebit is a Bacs-approved provider of both training and consultancy.
If you want more comprehensive help, consider using our Bacs Bureau services. We can make life easier and deal with every aspect of managing Direct Debits – and Indemnity Claims – on your behalf.
ClearDebit offers
Bacs Approved Training. Get in touch if you need help understanding the scheme process or if you have an issue with volume of indemnity claims you are receiving.
