What are various reasons for a Direct Debit payment failure?

Direct Debit failure 

There are multiple reasons why a Direct Debit may fail, and some common reasons  are as follows: 

• Insufficient funds 
• Direct Debit cancelled 
• Incorrect account details 
• Payer deceased 
• Payer transferred to a new bank account 
• Administration error 

Insufficient funds 

If a customer has insufficient funds in their bank account, then a Direct Debit payment will ‘bounce’. Bacs uses the error code ‘Refer to Payer’ to mean that the payer’s bank couldn’t pay the Direct Debit. Essentially, the payment will fail, and any funds attempted to be taken out of the account will ‘bounce’ back, returning to the customer. As a company, you can alert the customer to the missed payment, while their bank or building society may also choose to as well. 

You can also manually retry to retrieve the payment too. Or, if the customer gets in touch to explain the situation, a new date can be agreed for the payment to be taken. 

Often, if there are insufficient funds and a payment has been missed or is late, a late fee can be added on to the next Direct Debit payment. 

Direct Debit cancelled 

Occasionally, and frustratingly so for companies, a customer can manually cancel their Direct Debit agreement with their bank. When attempting to retrieve the payment, the company will be alerted to the fact that there is no agreement in place anymore. 

 Incorrect account details 

A Direct Debit payment can also fail because incorrect account details have been passed to the company. However, this should be a very rare occurrence because any company setting up a Direct Debit agreement with a customer should perform their own due diligence to ensure the person is who they say they are, and all their details are correct. At this stage, the company should perform a Confirmation of Payee check to ensure all information provided to them is accurate. 

 Payer deceased 

Another reason for why a Direct Debit may not be taken is that the payer might be deceased. In this instance, family members may contact the relevant parties (company with the Direct Debit agreement and the bank) in order to cancel and arrange any following steps. 

Payer transferred to a new bank account 

Quite often, a payer can transfer to a new bank account. All Direct Debits are normally transferred over to the new account at the time but there can be a delay, especially if the transfer takes place on the same day or a day or two before the payment date. 

Administration error 

An admin error can also become a reason for payment failure to take a Direct Debit if the company fails to attempt the collection due to a problem with their service or software, or if they take it late. 

The Direct Debit scheme does allow for payments to be collected upto 3 working days after the set payment date. 

All BACS payment failure codes are mentioned below. If you have any questions please do not hesitate to contact us on customer.services@landz.co.uk

BACS AUDDIS, ADDACS, and ARUDD reason codes