Ensuring your direct debits are automatic, not problematic

Direct debits are a convenient way to settle your payments and avoid outstanding bills without having to consciously transfer money. However, it is important to be aware of the legal requirements and terms set out in your direct debit request agreement, to protect your finances. This Business Kitz blog will act as your guide to direct debit legislation, cancellation processes and how to resolve a dispute. 

What is a direct debit?

Direct debits and the relevant legislation are managed by the Australian Payments Clearing Association (APCA), and are an automatic transfer of funds from your bank account to another account or specific service provider. The transfer of funds will involve regular withdrawals being made from your dedicated account by the service provider you have given your details to, however other forms of automatic payment may be recurring charges to your credit card. This money is taken from your chosen business or savings account on a regular basis, where common intervals are monthly, fortnightly or weekly. Direct debit payments grant you the security of not having to remember to make certain payments for services, avoiding late fees that may impact your business relations. 

How do I set up a direct debit?

Setting up an automatic bank transfer requires a debit request agreement, or direct debit authority, for your bank to authorise money being deducted from your account. It may also be a requirement of your service provider when signing up to use their services. For busy, time-poor business owners, the easiest way to manage direct debits is through a fixed payment on a fixed date system, where you know the sum of money is not subject to change. It is best practice to be aware of how much money is in your account and whether your fees increase to ensure your direct debit payments are being processed on time and are in accordance with the agreed conditions. 

How do I cancel an automatic payment?

Life truly can be easier when your finances are automated, however there are risks of losing money if cancellation of a direct debit has not been processed when you assume it has been. Issues arise when a direct debit authority has been given to an untrustworthy service provider or if you are unsure of how to cancel a payment. Common complaints received by the Telecommunications Industry Ombudsman include:

  • Providers overcharging a direct debit or processing it on a different date to what was agreed;
  • Direct debits taken without notice or permission;
  • Providers charge a fee on the way a payment is paid; and
  • Missing or incorrect payments.

Under the general banking code of practice, it is recommended to contact your bank and communicate with your service merchant regarding any issues or to request a cancellation of a direct debit payment. If you feel you have been given misleading information or have been wrongly charged you have the option of making a complaint with the Australian Competition and Consumer Commission (ACCC), however if you are unsure about the conditions you have agreed to it is best to seek legal advice. A way to protect your finances includes if automatic payments are set up with your online banking such as PayPal; which grants you the ability to stop or change the payment. Ensuring you have a financial record and proof of any missing payments will also assist you should any legal matters arise.

Legal advice 

If a direct debit payment is a part of a business contract or terms and conditions of a service, it is recommended to seek legal advice and to see if an alternative payment method is required for any outstanding fees. Business Kitz has a range of contracts and agreements and free customer support to aid your business operations and our sister company, Legal Kitz, can assist you with any concerns you may have. You can book a free 30-minute consultation with their experienced and highly qualified team via our website now.

We are currently onboarding our first 3,000 users to our new powerful AI-assisted software which will be live soon