Direct Debit Mandate Rules

Written by jeffery keilholtz
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Direct Debit Mandate Rules
Direct debit rules can usually be negotiated. (bank image by Pefkos from

According to the US Department of Treasury, direct debit mandate rules--also known as automated clearing house rules--go into effect when one bank account holder is instructed to withdraw funds directly from another account. Direct debit withdraws are electronic fund transfers used in making payments. Many businesses--especially multinational corporations--maintain direct debit collection protocols such as loan payment procedures between other businesses. Individual customers honour direct debit mandates, such as utility payments, from businesses as well.

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Verification Procedure

Before a direct debit mandate is processed it may be subjected to a verification procedure. This process will prove that a legitimate mandate exists. If one party disputes or challenges a collection (i.e. payment amount) direct debit rules dictate that the payee proceed with verification. This process clears up disputes and is established to maintain fair business practices between parties. In certain instances, according to the website for Business Management Magazine, direct debiting rules include "so-called 'non-pre-authorised' direct debits," which means no mandate verification is necessary.

Many documents may be necessary for verification in a direct debit procedure.
Many documents may be necessary for verification in a direct debit procedure. (document image by AGphotographer from

Stopping Payments

A debtor may also order his financial institution to prevent any or all direct debits to an account. This preventive measure, according to Business Magazine, is known as a stop payment. Stop payments may be initiated while verification procedures are in progress and are defined by multiple sets of criteria, including account numbers, creditor identification, withdraw amounts and/or mandate references. Under most circumstances, businesses and individuals can both initiate stop payment options.

Stop payments may also be defined by transaction identifications.
Stop payments may also be defined by transaction identifications. (stop image by hugy from

Foreign Exchange

According to Swift, a global financial messaging service, if a direct debit is initiated in a currency other than that of the debtor's account, the national procedures of the debtor's bank will triumph. When the sum of the debited currency differs from that of the creditor's order, the foreign exchange rate must be alerted to the debtor's financial institution to maintain the original amount. The creditor's bank must also instruct the creditor--with as much advanced notice as possible--as to the currency the mandate must employ.

Direct Debit Mandate Rules
The collecting bank must instruct the creditor's bank on foreign exchange terms. (Euros, twenty and fifty image by Warren Millar from

Individual Accounts

Individuals subjected to a mandate may be rightfully indebted to a creditor but have difficulty making payments. If this is the case, the terms of the mandate can usually be altered. Reduce your monthly payments by changing payment plans or, according to American Education Services, it may even be possible to change the payment due date. Consult with your financial institution with questions regarding loan consolidation, interest-only payments and changes to direct debit mandate rules.

Direct Debit Mandate Rules
Talk with your bank about recalculating direct debit payments. (business woman image by Mat Hayward from

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