Steps to take if a Direct Debit payment fails

• Direct debits fail for a number of reasons, but mainly due to insufficient funds. 

• Before trying to re-collect a direct debit, it’s important to find out why it failed in the first place. 

• Some providers, such as Access PaySuite, re-present with no charge

Most failed direct debits occur because of insufficient funds or where a payer has cancelled their direct debit instruction. When this occurs you’ll receive an ARUDD report citing a reason for the failure. However, there are some other reasons too.

Closed accounts

If the account has been closed, transferred or isn’t recognised, this can cause a direct debit payment to fail immediately.

Payer disputes

If there is a dispute with the payer, such as insufficient funds or due date, a direct debit payment most likely won’t go through as planned. 

The payer has deceased

A deceased payee is also a common reason. In this case, family members may contact the relevant parties in order to cancel and arrange any following steps.

No direct debit instruction

Having no direct debit instruction in place can cause a payment to fail due to lack of authorisation. 

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.

Whether a customers’ direct debit is retried depends on how you collect Direct Debits. If you use a direct debit bureau, they may re-present these for you for a fee. Other options, such as Access PaySuite, re-present with no charge.

If your Direct Debit payment failed and you need to reverse an incorrect charge, check out our guide on how to reverse a Direct Debit payment for step-by-step instructions. 

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.

Dealing with Direct Debit failures can be frustrating, but you don’t have to handle it alone. Whether you’re looking to reduce failed payments, automate collections, or improve cash flow, our expert solutions can help.

Get in touch with our team today to see how we can streamline your payment processes!