Direct Debits - Is this right?

jambosans

DevilsAvocado wrote: »

Although this may be the case with Halifax, it is entirely possible to switch direct debit instructions between two accounts with the same institution without a switching team.

There's no question that the process can be automated, but I would imagine a team is required because there are requests being sent to the DD Originators outwith the bank. The minute you involve external parties you are asking for problems and delays, something an entirely automated service could not resolve - hence the requirement of the switching team. Again this fact is acknowledged on Halifax's own website:-

... we do rely on the organisations you pay by direct debit and your previous bank or building society to quickly change their records. If they take too long to respond, this could delay the switch. Your employer or pension provider is also responsible for changing their records and paying your salary or pension into your new account.

The switching team are there to make sure the automated processes run smoothly, and also to resolve any issues that occur during the AATS (Account Automated Transfer Service).

DevilsAvocado

jambosans wrote: »

There's no question that the process can be automated, but I would imagine a team is required because there are requests being sent to the DD Originators outwith the bank. The minute you involve external parties you are asking for problems and delays, something an entirely automated service could not resolve - hence the requirement of the switching team.

The reason you need a team to handle the process from bank to bank is because the underlying BACS system doesn't offer a way to safely automate the system for all DDO (Direct Debit Originators) types to give entirely new sort code and account details - it also doesn't allow for updating the DDO with name changes (i.e. if you switched a Direct Debit from a sole to a joint account).

The process, however, is significantly easier within a bank. To give you some background, every transaction undertaken by UK banks has a "transaction code" that dictates the kind of transaction and the rules that apply. To give you some examples that you might see regularly:

• 02 is a debit, and typically seen on Barclays or Lloyds cheques;
• 73 is a credit (on the bottom line of a Bank Giro Credit) destined for a clearing sort code, and does not require an account number;
• 77 is a credit to a personal bank account and should feature a serial number;
• 78 is as above but for a business account;
• 70 is an "ad hoc" credit, i.e. a credit slip from a branch.

There is then a subset of transaction codes that apply for Direct Debits:

• 01 - first Direct Debit payment (this is how your bank knows it's the first payment, and may print such information on your statement/online);
• 17 - Regular Direct Debit payment;
• 18 - Direct Debit representation - trying to collect after a previous payment has bounced;
• 19 - final payment - the instruction should be marked as "Canceled" or "Expired" following this payment.

There's then the all important ones for this process:

• 0N - New instruction;
• 0C - To cancel a direct debit;
• 0S - Conversion - gives details of new account, etc.

The information is then fed back through various reports given to DDOs. The key one here is the ADDACS report - Automated Direct Debit and Cancellation Service - which gives a real time update of the new details, and then applies them.

As said, switching accounts between banks can be a difficult task, but these difficulties don't exist intrabank due to the very set up of the system.

jambosans

DevilsAvocado wrote: »

The information is then fed back through various reports given to DDOs. The key one here is the ADDACS report - Automated Direct Debit and Cancellation Service - which gives a real time update of the new details, and then applies them.

As said, switching accounts between banks can be a difficult task, but these difficulties don't exist intrabank due to the very set up of the system.

You are clearly much more clued up on this than I am, however I would like to just clarify a few points. If, the bank can easily internally transfer a Direct Debit from on account to another they will still have to inform the DD Originators. Are there not still cases where the Originator may not use an automated service such as AUDDIS, therefore require their records and a new mandate to be manually updated/ setup? Surely the switching team (as I've said before) is there to keep the process running smoothly. For example, an Originator not acting on a request to update their records, requiring a second request. You would also always have the issue were the customer needs to clarify which Direct Debits they wish transferred over. In many instances there will be dormant, but active Direct Debits that do not need transferred, and as a result the system must be updated manually.

I agree that the process will be much less complicated internally but I would have still thought there was a requirement for a switching team to oversee the process.

DevilsAvocado

jambosans wrote: »

Are there not still cases where the Originator may not use an automated service such as AUDDIS, therefore require their records and a new mandate to be manually updated/ setup?

AUDDIS isn't a service in and of itself, it's a service that's operated through Bacstel-IP software as an explicit part of that. Direct Debit Originators require some sort of software to originate their payments in - this may be the standard software or something provided by their bank.

Regardless, said software integrates the major reports and services (AUDDIS, ADDACS as I mentioned, and there are three others called ARUCS, ARUDD and AWACS).

It's these reports/services that update the originator, and they're in use everywhere - regardless of the originator's access to the network. The transferal of Direct Debits doesn't require a new mandate to be created for each one. The ADDACS report is automated and updates databases to the new details, for example.

Surely the switching team (as I've said before) is there to keep the process running smoothly. For example, an Originator not acting on a request to update their records, requiring a second request.

The paying bank will first have sent an 0S transaction with new details to the originator. If they, for some reason, ignore this, then the DDI is returned with a reason such as "new instruction" - it's effectively canceled from that account. If you've ever seen a Direct Debit canceled in a bank branch, they may have more options than you have online, for example - you can cancel or transfer direct debits with reasons such as customer deceased.

That said, ignoring it is going to be limited to a few cases, as 99.9% of users are automated. There's no need for a second request, as they'll be able to see the reason for the Direct Debit being unpaid on the ARUDD (Automated Return of Unpaid Direct Debits) report/service.

You would also always have the issue were the customer needs to clarify which Direct Debits they wish transferred over. In many instances there will be dormant, but active Direct Debits that do not need transferred, and as a result the system must be updated manually.

You're not obliged to switch entire Regular Payments files over - i.e. you can switch just one or two Direct Debits, at the instruction of the customer, from a branch, etc.

It's different between banks because their exists no automated process to do so, which is why you get the list of payments when you switch. You then choose which to carry over, and the rest are effectively canceled in the process.

To give you some sort of analogy, going interbank is like moving houses - it means moving everything and getting a removals company involved. Going intrabank is like moving furniture from one room to another - you can do it yourself easily.

I agree that the process will be much less complicated internally but I would have still thought there was a requirement for a switching team to oversee the process.

There honestly isn't - switching teams exist because of the system not having a means or method to switch interbank. This was all designed in a day when it was a hassle to switch branches, let alone banks.

jambosans

I humbly stand corrected. Although you have invalidated one of my reasonings behind Halifax not offering the service I still see no need (except in exceptional circumstances) for Halifax to offer such a service.