Reading time: 4 minutes

If you run a business, you want to make sure that clients can pay you in the easiest way possible. One simple way to receive payment is through direct debit. Direct debit is an automatic transaction that transfers money from one person’s account to another on a recurring basis. But to receive payment through direct debit, you must first receive approval to automatically withdraw funds from your clients’ accounts. Here, you must follow some practical guidelines set up by payment regulating body, AusPayNet. This article will explain these guidelines and the four key steps you must take to receive approval for a direct debit request (DDR).

1. Establish Your Legitimacy

If you wish to offer direct debit payments, AusPayNet requests that you demonstrate your business’s legitimacy. This means that you must:

  1. be an established business or entity; and 
  2. contact your bank to request approval to offer direct debit payment.

You may need to provide your bank with evidence that you meet their criteria.

The criteria may include information relating to: 

  • how you will identify your clients to avoid fraud;
  • what kind of service are you providing;
  • whether you have a refund policy; and 
  • your compliance with the Bulk Electronic Clearing System framework.

If you meet your bank’s criteria, they will provide you with:

  • their terms and conditions, which you must understand and agree to; and
  • a user identification number, which you require to offer direct debit services.

2. Establish Your Clients’ Identity

One of the AusPayNet’s key concerns is to limit fraud that may occur if a client is misidentified.

For example, issues can arise surrounding properly identifying clients if you receive their consent for direct debit:

  • over the phone;
  • through email; or
  • electronically.

To manage this risk, you must receive a completed DDR form from each client. You must keep this form for seven years from the date of the last debit made under the DDR. The DDR form must:

  • authorise your business to debit the client’s account;
  • identify the bank that will process the debit (name and BSB);
  • outline the account name and number of the client;
  • identify your business (through both business name and user identification number); and
  • be dated and signed by the client.

Can You Receive Authorisation Over the Phone?

You may only receive authorisation over the phone if your bank has approved it in writing. You should ensure that your client identifies themselves in accordance with your bank’s requirements. Further, you will need to provide your bank with written confirmation of the agreement and the DDR service contract within seven days of the call.

3. Define Your DDR in a Service Agreement

The DDR service agreement sets out the terms and conditions surrounding how you will debit your clients’ account. AusPayNet requires that the DDR service agreement include particular items such as:

  • how the client can amend or cancel the debit arrangement;
  • that the client must have sufficient funds in their account; and
  • your policy if payments fall on a day other than a business day.

4. Consider Privacy

By requesting that your clients complete the DDR form, you may be collecting personal information such as: 

  • contact details; 
  • account details;
  • addresses; 
  • telephone numbers; and
  • email addresses.

If clients provide your bank details, it is likely they will want to know how you manage this information from a privacy perspective. Therefore, it is best practice to have a privacy policy. A privacy policy will set out how you securely hold and handle information, which will enhance your legitimacy and confidence in your clients.

Key Takeaways

To offer direct debit payment from clients, there are a number of steps you must take. First, you must comply with AusPayNet requirements and ensure that clients cannot make fraudulent payments. Further, you must ensure that your DDR service agreement clearly sets out your terms and conditions surrounding DDR payments. You will also need to ensure that your privacy policy outlines how you will handle any personal information. If you have any questions about drafting a DDR service agreement or privacy policy, contact LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Nathalie King
Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards