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Why due diligence is so important for Direct Debit customers

Why due diligence is so important for Direct Debit customers 37

Bacs approved Direct Debit and payment solutions provider, Interbacs, is an industry leader in safeguarding and due diligence. Authorised by Bacs and the Financial Conduct Authority (FCA), the Manchester-based firm works closely with Trading Standards and Pay.UK to raise industry standards in this area. Interbacs Director, Edward Taylor, explains how and why his firm works so diligently to vet, approve and scrutinise its Facilities Management customers.

Direct Debit & mis-selling scams

Unfortunately, Direct Debit fraud can and does occur in the UK. One highly publicised scam involves the mis-selling of insurance and other appliance based schemes.

This scheme involves individuals exploiting direct debit traps in order to target the vulnerable. These individuals mis-sell insurance in order to manipulate customers into signing up to Direct Debits and unwittingly parting with their cash.

The importance of due diligence

Similar to that of a Visa or Mastercard card terminal, FM companies merely provide a Direct Debit payment channel. The channel is neutral in its nature. Unknown to the general public, FM companies do underwrite the whole of the collection risk and this is perpetual as the scheme rule stands now.

With these types of fraud schemes, payers can claim 100% of their funds through an indemnity claim process on an indefinite basis. Subsequently, the FM company is at a greater loss if they unknowingly reimburse funds to fraudulent companies who mis-sell Direct Debit as the consumer will claim directly from the FM company. For this reason, FM companies do go through lots of checks prior to onboarding any clients and subsequently need to monitor risk profiles closely to prevent fraud or simply deteriorating risk trends.

At Interbacs, a Direct Debit provider, we thoroughly vet and approve all of our clients. We also undertake stringent ongoing checks throughout their time with us and place punitive risk mitigating measures on those that don’t adhere to our stipulated criteria.

All Direct Debit Facilities Management companies have to go through Pay.UK’s accreditation process to evidence their risk underwriting and Facilities Management processes to be able to offer such a service to any potential business clients. Each FM company also has to partake in regular risk underwriting processes with their sponsoring bank to ensure they can satisfy them on all levels to continue receiving sponsorship.

Keeping Direct Debit Customers safe

As a Facilities Management firm, Interbacs closely adheres to the rules laid out by Pay.UK (the UK’s leading retail payments authority). This means that whenever one of our clients sets up a new Direct Debit for a customer through ourselves, a letter of advance notification of the Direct Debit is sent to that customer.

This letter not only details the amount that will be debited from the customer’s account but also the date, giving them advance notice should they wish to cancel it. The letter also outlines who the Direct Debit will be taken by (Interbacs and our FM client in this case). We also provide our phone number, so that they can call us if they believe any of the enclosed information is incorrect. Our expert team is trained to help.

We monitor any such cancellation calls and relay the reasons provided directly back to our clients. We track how many of these cancellations each client receives and any high volumes are flagged up to us when we review their account.

Interbacs ensures we treat vulnerable customers of our clients with special care whereby a customer can telephone our team complaining that they didn’t approve of the Direct Debit, they are always asked if they consider themselves to be vulnerable. If so, we give them the option of opting out of ever being signed up to Direct Debit by another firm through Interbacs again. This means that any client of ours in the future cannot set up a Direct Debit for that customer. As far as we are aware, we are the only Facilities Management firm in the country to do this.

Facilities management checks and measures

Any new client that wants to utilise Direct Debit payments through Interbacs has to pass numerous checks and measures. These checks are seen as the banking “gold standard” and are the same as those enforced by Barclays and HSBC banks.

We review all of their documentation including contracts, customer service and complaints policies, and their vulnerable customer policy. We also request to see a copy of the sales scripts their teams use and even request call recordings to listen to so that we can be assured these meet our tight, legal, and ethical standards. We also check websites like who-called.co.uk and Trustpilot to see how a new client’s firm is ranked. Again, if anything negative is discovered, we request an explanation or we decline them as a client. These measures are periodically repeated on an ongoing basis.

Our underwriting team then carries out a rigorous risk underwriting process, analysing the Direct Debit collection profile in relation to values, volumes, frequency, collection time, and many other factors. Once the new customer is sanctioned, they enter a three-month probationary period; during which time they are closely observed across a number of parameters.

We monitor everything from the amounts and frequency agreed for collection to the total file values agreed at the point of onboarding for each file. We also keep a close eye on the number of Direct Debit cancellation calls we receive on their behalf. The percentage of cancellations, indemnity claim rates, and number of new Direct Debit customers who identify as “vulnerable” and request to cancel versus their total number of new Direct Debit customers must all be below 2%.

Maintaining high levels of service and preventing fraud

As throughout the information you can find on Action Fraud, Fraud prevention is a task that requires our collaborative efforts. Consumers and businesses need to be constantly brought up to date on the various new types of frauds happening in the community and prevent themselves from falling victims of any such scams. Facility providers such as Banks, Card Terminals, and Direct Debit Facility providers and all others would need to be vigilant on such scams too to ensure they don’t fall victims of such business practice using them to carry out such fraudulent activities. Trading Standards and the likes of authorities will need to carry out exercises to stamp down such ill practices timely and effectively. Interbacs is always here doing their part to educate direct debit payers and ourselves so that we won’t fall victim to any such fraudulent practices.

Interbacs is very proud to have operated in this market for more than 20 years. Over the years, we have supported many businesses through our Direct Debit solutions and services. In order to continue providing such a consistently high level of service – one that safeguards our clients and their customers from financial risks like fraud and money laundering – we take swift and decisive action to terminate contractual relationships if we believe a client’s conduct contravenes strict regulatory and self-governed standards.

Interbacs was established by Bacs software developing experts with more than 30 years of experience in Bacs and business payment software delivery. Providing the ultimate support for all your Bacs payments processing needs, Interbacs delivers the highest-quality payment and collection solutions. The friendly, professional and efficient processing team at Interbacs is always on hand to answer your phone calls with a smile and a listening ear. For more information, please contact 08444 127 180 or sales@interbacs.com.

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