Select Committee on Treasury Minutes of Evidence


  There are a number of parties involved in the switching process:

    —  the "existing" bank—with whom the customer already has a bank account;

    —  the "new" bank—to which the customer wants to switch;

    —  the "originator"—the company receiving payment via Direct Debits; and

    —  BACS—through which payments move and which provides electronic mail boxes for originators to retrieve account details.

  Speeding up the process requires ensuring that each stage in the process takes place within the timescales agreed.

  Abbey National is calling on BACS to implement a set of guidelines for speeding up transfers and making the process more predictable. We attach a chart demonstrating the various stages of the process and summarising our recommendations for improving each stage. These recommendations are:

  Implement the full use of electronic communication as outlined in Phase 4 of the BACS Switcher Automation programme. Currently, much of the information exchange is paper-based, but ensuring that all details are conveyed electronically would eliminate many of the delays and improve reliability. BACS will be considering a proposal to implement this phase in 2004 at the earliest; Abbey National believes it should be implemented sooner.

  Improve the quality of data provided by existing banks. Currently, the existing bank supplies a comprehensive list of mandates—eg, Direct Debits and standing orders—that includes some items that are no longer active. This practice is unnecessary and causes delays and customer confusion. We recommend that the existing bank provide details of the last date each Direct Debit was used. This will indicate the likelihood that the Direct Debit is still relevant to the customer.

  Apply structured service standards to speed the response by "originators" of Direct Debits—those companies being paid through the Direct Debit process. Currently, the Direct Debit scheme says that all requests to change a Direct Debit must be actioned within three working days following receipt of the request. This standard is not being followed, and there is no penalty if originators do not comply.

  Originators are notified of the need to change a Direct Debit in either of two ways:

    —  large originators will have an electronic mail box at BACS. If requests are not opened within three working days of receipt at BACS then they are forwarded on automatically by BACS through the post; and

    —  small originators don't have an electronic mail box, but requests are forwarded on by BACS automatically. This adds two working days to the process.

  In the current guidelines, the three working-day "clock" does not start ticking until originators retrieve the notification, rather than when the request is posted. We recommend that:

    —  for large originators, the turnaround time begins when the notification is received in the BACS mailbox. Further, large originators should not be given the option of receiving requests by post, which adds further delay. This should in turn motivate them to access their mailbox daily; and

    —  small originators should be given five working days to respond from the day the notice is received at BACS.

  Finally, we are recommending that BACS put a structure in place for monitoring and penalising Direct Debit originators who fail to comply with service standards. BACS should make the information about originators' compliance records public.

  The process and Abbey National's recommendations are summarised in the following chart.

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