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Do you operate a gym, supply software as a service or run another subscription-based business? If so, you are likely to have an automatic direct debit system in place. If not, you are probably looking to set one up. When setting up an automatic direct debit system, it is a legal requirement that you obtain your customers’ consent to take funds out of their account automatically. This involves providing customers with a direct debit request (DDR) form and a DDR service agreement. The Australian Payments Clearing Association (APCA) has specific rules about what your DDR form and DDR service agreement need to contain.

This article will explain both the DDR form and the DDR service agreement. It will also discuss how you can ensure you are complying with the APCA rules.

DDR Form

The DDR form is designed to collect details about the bank account your customer would like debited. It also sets out when and how much will be deducted from the customer’s bank account.

The APCA rules say that you must ask for a number of things, including the customer’s:

  • bank account name;
  • account number; and
  • BSB number.

Asking for the branch’s address or suburb is optional. However, your DDR form must contain:

  • your bank account details, so customers know into which bank account their funds will go; and
  • your user identification number — the unique number that any business using automatic direct debits must obtain from the APCA.

If the customer is providing their consent in writing, the customer must sign and date the document.

You must also set out on either the DDR form or in the DDR service agreement:

  • the amount of the payment you will deduct from the customer’s account;
  • how often you will deduct the payment from the customer’s account; and
  • on what date you will deduct the payment from the customer’s account.

If you set out this information on the DDR form, then the DDR service agreement must tell the customer to refer to the DDR form to confirm these details.

DDR Service Agreement

The DDR service agreement is the document that you must provide to your customers alongside the DDR form. It sets out the terms and conditions under which you will debit a customer’s bank account.

There are specific statements you must include in your DDR service agreement. The information you have to provide in your DDR service agreement includes:

  • that your customers can cancel, amend or dispute a direct debit payment at any time;
  • that the customer must have adequate funds in their nominated bank account to ensure payment is processed;
  • what happens if payment falls due on a non-business day; and
  • how you will treat any personal information the customer provides to you.

Key Takeaways

Having a DDR form and DDR service agreement is necessary to deduct payments from your customers’ bank accounts automatically. The documents will:

  • help you retrieve your customers’ information;
  • obtain their consent; and
  • set out warnings that customers must have sufficient funds in their account to permit your fees to be withdrawn.

Following the APCA’s guidelines is a legal requirement of organising direct debits with your customers. If you need help setting up a DDR system, or advice on your DDR form and DDR service agreement, call LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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