Direct debits: Why due diligence matters
Direct debit fraud is common in the UK, and can cause great stress and anxiety to those who have been struck by it. Fortunately, there is greater security for direct debits in 2022, with banks better able to support you if you feel you’ve been defrauded. To find out more about why due diligence matters when it comes to direct debits, continue reading this helpful guide.
Direct debit fraud
Direct debit fraud occurs when a payment is taken from your bank account without the proper authority from when you set up the direct debit agreement. That can sometimes happen when bank account details are published online, or fall into the wrong hands. For example, via an over-the-phone scam.
It is for these reasons that doing your own due diligence regards to direct debits is so important. Follow these simple steps to prevent direct debit fraud happening to you:
- Check your accounts regularly
- Block suspicious direct debits
- Avoid making your details public
- Get in touch with your bank ASAP.
Check your accounts regularly
Once you’ve set up a direct debit, it can be easy to forget about it and let the bank or third party company do the rest of the work. However, you should always keep an eye on your bank account and ensure that you’re fully aware of everything coming in and going out.
Block suspicious direct debits
If you’ve checked your account regularly and happen to have stumbled across any suspicious activity, one course of action would be to block it. You do have control over your account and can block anything suspicious by contacting your bank.
Avoid making your details public
Over the past few years, fraudulent phone calls and online activities have become more common, with particularly older people falling foul of scams. Many over-the-phone scams, fraudulent text messages and online scams do well to disguise themselves as your bank, which many people fall for and hand over their bank details.
One thing you should always remember is to never hand over bank details over the phone. If your bank were to contact you, after passing strict security checks they would have your information to hand anyway, so would not need to request for specific details.
Get in touch with your bank ASAP
If you’ve been scammed or have found fraudulent direct debits taking money from your account, you should contact your bank as soon as possible. The quicker you act, the better chance you have of getting your money back and resolving the situation.
Know your customer checks
Know Your Customer (KYC) checks are part of a set of banking regulations that are used for verifying the identity of clients. KYC is key in preventing direct debit fraud, and ensures that individuals are who they say they are, and live where they claim to live before a direct debit collection is taken. These checks are mandatory for paperless direct debit sign ups, which are carried out remotely.
As a business, KYC helps to minimise risk as the checks help to protect against fraud, money laundering, bribery, and other serious crimes.
Failure to do your due diligence as a business can put the company at risk.
Addressing direct debit risks
While direct debits are, on the whole, seen as a positive thing for both customer and company, they do carry some risks.
Overdraft and late fees
Direct debuts can trigger overdraft or late fees. If you have insufficient funds and a direct debit attempts to leave your account, it will likely mean you’ll receive a charge for going over your limit and into an overdraft. From a business perspective, the payment may bounce, leaving you having to chase the customer for payment.
Third party control
Your details are in the control of a third party company, so if you have the slightest doubt over their credibility, you must not go ahead with any direct debit agreement.
Refund may take time
Depending on the bank and company connected to the direct debit, a refund may take a few working days to process, so if you’re in need of the money you would possibly have to go without for a while.
Direct debit solutions at Interbacs
Interbacs offers market leading Direct Debit solutions. As one of the first Bacs approved Direct Debit providers in the UK, we have a wealth of experience in delivering first-class Direct Debit systems. We have a range of products and services that can help you to manage your cash flow, from our Bacs Approved Bureau to our InterPay Bacs payment software. Our Direct Debit solutions make signing up new customers a quick, easy and streamlined process.