💷Bacs Direct Debit
Overview
Bacs Direct Debit enables creditor to collect money in GBP from debtors.
LHV Bank offers receiving collections service only.
Glossary
Creditor - The creditor is the entity or organization that is authorized to receive payments from the debtor through the direct debit arrangement. The creditor could be a business, a service provider, or any organization that bills for goods or services regularly. For example, utility companies, subscription services, and loan providers are common creditors in direct debit transactions.
Debtor - In a direct debit transaction, the debtor initiates the process by providing written or electronic authorization for the creditor to collect payments from their bank account in the form of a Direct Debit Mandate. The creditor, in turn, submits the necessary information to the debtor's bank, which then facilitates the transfer of funds from the debtor's account to the creditor's account.
Bacs processing cycle - The Bacs processing cycle operates on a three-day schedule and only on working days. Three-day schedule: Input day (day 1) - Input day is the day a business user/bureau submits a payment file to Bacs for a processing cycle. Processing day (day 2) - Files are delivered to the recipient banks which then process each payment. Entry day (day 3) - Payments are simultaneously debited from the debtors' accounts and credited to creditors' account. The last day when Direct Debit return or Mandate return can be initiated. See cut-offs
Account Service Provider - Debtor's bank
Service user number (SUN) - A unique reference allocated to organisations authorized to use a service. In the context of Bacs, the SUN is a six digit number.
Direct Debit Mandate (DDI) - A direct debit mandate is an authorization given by an account holder to a third party, allowing them to automatically withdraw funds from the account on a regular basis.
When a debtor sets up a direct debit mandate, they provide the necessary information, including bank account details, to the entity that will be receiving payments (creditor). This information is typically used to create an agreement that allows the specified amount to be debited from your account at agreed-upon intervals. The creditor must adhere to the terms and conditions outlined in the mandate.
Receiving Mandates
Receiving Mandates: Reception and Execution of Bacs Direct Debit Mandate
To receive incoming collection, the mandate agreement must be signed with the debtor. The debtor is to give the signed written mandate directly to the creditor. The creditor is liable for safekeeping the mandate and submitting it to the scheme. All mandates are also held in the debtor's bank (LHV). The debtor agrees with the creditor on changes in the mandate and on its cancellation.
The creditor or the debtor can amend the mandate at any time. If the mandate is amended, the information must also be sent to the debtor's bank.
The cancellation of the mandate is carried out by the creditor and the debtor. If the mandate is cancelled, the information must also be sent to the bank.
Receiving Mandates: Processing Exceptions
Debtor may reject mandate or request cancellation or amendment of the mandate.
Reject mandate
Debtor can reject the mandate until the end of the entry day. See cut-offs.
If debtor rejects mandate it will be returned to creditor and mandate will be not activated. Therefore no Bacs Direct Debit Collections can be initiated with this mandate.
Receiving Collections
Businesses or private persons, also referred to as the debtor, can receive collections.
To receive a collection, the mandate agreement must be signed with the creditor. To receive a collection, there needs to be a mandate agreement on the bank side as well. Collections can be received on any current account opened for the client.
If the debtor wishes not to receive collections on a specific current account, the account service provider must be contacted. If the debtor wishes to amend or terminate the mandate, the debtor must contact the creditor or initiate a mandate cancellation request.
Receiving Collections: Reception and Execution of Direct Debit Collection
Direct Debit collection is received only on banking day's. Debtor bank receives Bacs Direct Debit collection message on the Processing day (day 2) of Bacs cycle.
Received collections are seen in LHV's internet bank, mobile app as pending outgoing payments. Connect's clients receive information by XML file (see messages). Please contact your account manager to enable the functionality.
The outgoing payment processing starts on the Entry day (day 3) of Bacs cycle. Bank tries to make the payment several times but if there is not enough money or limit the payment is cancelled. No partial payments are made. See cut-offs.
Outgoing payment settlement happens at 06:00, transaction entry will be seen on the account statement. If debtor is Connect user also debit/credit notification is sent.
Rejection
Debtor can reject the collection until the Entry day (day 3). See cut-offs.
If debtor bank handles rejection after Settlement, rejection is processed and settlement entries will take place.
Reversal
A Direct Debit Reversal is used when a previously received Direct Debit is cancelled and should not be applied. The credited party cannot refuse the request. If successful, a reversal results a credit on the debtor account specified in the original Direct Debit.
If the Direct Debit and the reversal are received in the same Bacs file, they are cancelled out.
Credit reversal could be run up-to 6 days after original Direct Debit Collection event.
Cut-offs
Messages
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