Why Might a Direct Debit Payment Fail?
What happens if my direct debit fails? As a service user you’ll receive a notification via an ARUDD (Automated Return of Unpaid Direct Debit) report, citing a reason for the failure. The most common reasons are insufficient funds or where a payer has cancelled their instruction. Other reasons include:
- The account has been closed, transferred or is not recognised
- There is a dispute from the payer, such as the amount or due date
- The payer has deceased
- There is no Direct Debit Instruction in place.
How to Deal with a Failure
When a Direct Debit collection fails, you can try and collect the payment again. This is known as re-presenting. However, before trying to re-present, it’s important to understand why the failure happened in the first place, using the reason code in your ARUDD report as a starting point. A re-presentation should only then be made if the collection is likely to be successful. Otherwise, it wastes time and money. If you do decide to re-present, here’s the criteria you have to meet:
- The re-presentation is within 30 days of the original collection date
- The Direct Debit has not been cancelled since your last collection
- It is not past the end date of the payer’s Direct Debit collection schedule
- The code returned in the ARUDD report is not ‘No Instruction’ as this implies no instruction is held at the paying Payment Service Provider. A dormant Direct Debit can be resubmitted, but this needs to be identified to your bureau and resubmitted to Bacs.
- It is identified as a transaction code 18.
Thankfully, the success rates of collecting failed Direct Debit payments is high and over double that from a credit card. In fact, Chargebee showed that an average of 25% of payments were recovered through dunning.