Don’t let sleeping DDIs lie and fall foul of the dormancy rules
New legislation means some local authorities may be exceeding the Direct Debit dormancy period, resulting in Direct Debit Instructions (DDIs) becoming dormant and the subsequent collections failing.
As a result of the Non-Domestic Rating (Small Businesses Rate Relief) (England) (Amendment) Order 2010 some local authorities may be required to make changes to their procedures for collecting non-domestic rates, particularly for small businesses, suspending payment of them for a period of twelve months from 1 October 2010.
Why could this be a problem?
If non-domestic rates for a given year are collected over a 10 month cycle there is a risk that 14 months may elapse between the final collection in one cycle and the first collection in the next. The standard dormancy period for DDIs held against Service User Numbers (SUNs) is 13 months (see section 7.2.6 of The Service User’s Guide and Rules to the Direct Debit Scheme). So some DDIs may expire before a further collection is made resulting in a returned Direct Debit collection with the reason code 6 “No Instruction”.
What do we need to do?
- Check whether your local authority is affected by the new legislation
- If your local authority is affected by the new legislation you will need to decide how to address this:
- Consider talking to your sponsoring bank about temporarily extending the dormancy period for the specific SUNs under which affected payments are collected
- Or, consider seeking new DDIs from the affected payers
For further information about dealing with the effects of the new legislation on the dormancy period of SUNs contact your sponsoring bank.