An indemnity claim is how a payer's bank gets back money it has refunded to your customer under the Direct Debit Guarantee. The refund has already happened by the time you hear about it, and the amount is taken back from you unless you challenge the claim successfully, which needs evidence that you collected exactly what you told your customer, on the date you told them. The window is short, so act on the day the claim arrives.
In this article
The short version
- An indemnity claim is how a payer's bank recovers money it refunded under the Direct Debit Guarantee.
- The refund has already happened by the time you hear, and the money comes back out unless you challenge.
- A challenge needs evidence that you collected exactly what you notified, on the date you said.
- The deadline is days, not weeks, so ask your provider for it before you need it.
- A refund doesn't cancel a debt that's genuinely owed.
What an indemnity claim is
Under the Direct Debit Guarantee, a customer who says a direct debit was taken in error gets a full and immediate refund from their own bank. They don't have to contact you first, and the bank doesn't wait to hear your side. Once it has refunded them, the bank raises an indemnity claim to recover the money from whoever collected it.
If you have your own Service User Number, the claim comes to you through your sponsoring bank. If you collect through a provider, the provider is the one the bank claims against, and it passes the claim on to you. Either way, the money comes back out unless the claim is withdrawn or successfully challenged.
A refund under the Guarantee doesn't wipe out the debt. If your customer genuinely owed the money, they still owe it, and the Guarantee itself says a payer who gets a refund they weren't entitled to has to pay it back when asked. A claim also isn't a finding against you: the bank has refunded on the customer's word and is recovering its money, which is how the scheme is designed to work.
What to do when a claim arrives
Each claim carries a reason. The standard ones are:
| Reason | What it usually points to |
|---|---|
| Amount or date differs from the advance notice | Your collection didn't match your notice |
| No advance notice received | Your customer says they weren't told |
| Mandate cancelled by the paying bank | A collection after the bank cancelled the instruction |
| Payer told you to cancel the mandate | A collection after your customer asked you to stop |
| No instruction held | Your customer says they never gave a mandate |
| Signature not genuine or not authorised | Fraud, or the wrong person signed |
| Raised at your request | You asked for a refund to be made, for example after an overcharge |
| Service user name disputed | Your customer doesn't recognise the name on the collection |
Then work through it quickly:
- Read the reason and find the collection in your records the same day.
- Decide whether you can show the collection matched what you told your customer. If you can, gather the evidence and send it to your provider (or your bank) straight away, inside the deadline they give you. That deadline is a matter of days, so ask your provider for it now, before you need it.
- If the claim is right, for example you collected the wrong amount, let it go and put the error right with your customer.
- If the claim is wrong but you can't challenge it in time, treat the amount as an unpaid invoice. Contact your customer, explain what was collected and why, and ask them to pay it another way.
The last reason in the table comes up when customers don't recognise the name on their statement, which can happen when you collect under a provider's name. Showing your own business name on your customers' statements, or saying clearly on your invoices whose name will appear, can cut that risk.
The evidence a challenge needs
A challenge comes down to showing that your customer was told what would be collected and when, and that you then collected exactly that. Keep these within reach for every customer on direct debit:
- The mandate, with the date and the way your customer signed it.
- Every advance notice, showing the amount, the collection date and where it was sent.
- Proof of when each notice went out, so you can show you gave the notice period you agreed.
- The collection record: what you took and on which date.
- Any email or call record where your customer confirmed the arrangement.
- Written agreement to any change in amount or date.
If you collect a different amount each month, the notice is your whole defence, so it helps if it's sent and stored automatically, not by hand.
How to make claims less likely
Claims tend to start with notice, timing or accuracy, all of which you control. Send notice for every collection, give the full period you agreed, collect on the date you said, stop collecting as soon as a mandate is cancelled, and get the invoice right before you collect it.
Adfin tells each customer the amount and date ahead of each collection, with at least three working days' notice, so the notice you'd need for a challenge exists before anyone knows it's needed. You can also choose at onboarding to show your own business name on customers' statements, for £36 a month, so the collection is easier to recognise. For invoices that do end up unpaid, Adfin's collection agents chase by email, SMS or WhatsApp on a schedule you approve.
Common questions
What is a direct debit indemnity claim? It's how a payer's bank recovers money it has refunded to your customer under the Direct Debit Guarantee. The amount is taken back from the business that collected it.
Can I stop the money being taken back? Only by challenging the claim successfully, with evidence, inside the deadline your provider or bank gives you.
How long do I have to challenge an indemnity claim? Days, not weeks. Ask your provider for the exact deadline it needs your evidence by, before a claim ever arrives.
What evidence do I need? The mandate, the advance notice with its amount and date, proof of when it was sent, and a record of what you collected and when.
Have I lost the money for good after a claim? Not if it was genuinely owed. The refund reverses the payment but not the debt, so you can ask your customer to pay it another way.
Do I get told before my customer is refunded? No. Their bank refunds them straight away and raises the claim afterwards, so you hear about it once the refund has happened.
Sources
- Bacs - Indemnity claims (accurate as of October 2026) https://www.bacs.co.uk/operating/indemnity-claims/
- Bacs - Glossary (accurate as of October 2026) https://www.bacs.co.uk/resources/glossary/
- Pay.UK (Direct Debit) - How to claim (accurate as of October 2026) https://www.directdebit.co.uk/help/how-to-claim/
- Pay.UK (Direct Debit) - The Direct Debit Guarantee (accurate as of October 2026) https://www.directdebit.co.uk/direct-debit-explained/direct-debit-guarantee/
