In this article
An indemnity claim is how the money comes back out of your account after a payer's bank has refunded them under the Direct Debit Guarantee. Bacs states that paying banks "are required to refund a payer in the event of an error under the Direct Debit Guarantee", and that "depending upon the error the indemnity claim process may be used" to recover it from you.
You find out through a report from your provider, usually after your customer has already been refunded. If you want to challenge it, you have days rather than weeks, and providers disagree about how many.
The short version
- The payer's bank refunds them first and recovers from you afterwards, so the debit happens whether or not you agree with it.
- Your provider tells you through a Direct Debit Indemnity Claim Advice report, known as a DDICA.
- Challenge windows published by providers range from 6 working days to 9 days, and one provider gives 14 days before the bank reclaims.
- A challenge needs evidence that the collection matched the advance notice you gave.
- Bacs's own pages on handling claims, the challenge process and the FAQs are all behind a login.
- Disputes are rare. Across the cancellations on our book that carry a specific code, 6 out of 816 were dispute-related (Adfin platform data).
The short answer
Read the claim, decide within days whether you can evidence that the collection matched what you told your customer, and challenge it if you can. If you can't, the money has gone and your route to recovering it is the ordinary one you'd use for any unpaid invoice, since the underlying debt survives the refund.
Most claims don't reward a fight. Given how rarely they arrive, the effort is better spent on the advance notice that prevents them.
How a claim reaches you
Your customer contacts their bank, not you. Pay.UK tells payers to get in touch with their bank or building society straightaway if an error has been made, and that "it's the bank that is responsible for refunding you in the event of a mistake, even if the original error was made by the organisation collecting the payment".
The bank refunds them and then raises the claim against you. GoCardless describes the mechanism: the bank "raises an indemnity claim against the service user, informing them via a Direct Debit Indemnity Claim Advice (DDICA) report". That report is what lands with your provider, and how quickly it reaches you depends on how your provider passes it on.
By the time you're reading it, your customer has their money. Nothing in the process asks for your version of events first, and that surprises most businesses the first time it happens.
Why the money goes back automatically
The debit isn't a penalty and it isn't a decision anyone took about you. It's the mechanism by which the bank that refunded your customer gets made whole.
One major UK direct debit provider puts it plainly in its own guidance: if you aren't disputing the claim, or if your challenge isn't successful, the bank will automatically take the relevant payment from your account. GoCardless describes the same thing on a timer, publishing that if the paying bank hasn't heard from the service user after 14 days, or a challenge has been unsuccessful, it will reclaim the amount refunded to the payer.
So doing nothing has a result. The claim is settled against you by default, and your bank balance moves without any further contact.
The reasons a claim gets raised
Claims carry a reason code of their own, separate from the ADDACS and ARUDD codes you'll see on mandates and returned payments. One provider publishes the set as follows. We could only verify it against that single source, so treat it as indicative and check the wording your own provider uses.
| Code | Reason for the claim |
|---|---|
| 1 | Amount or date differs from the advance notice |
| 2 | No advance notice received by the payer |
| 3 | Mandate cancelled by the paying bank |
| 4 | Payer cancelled the mandate directly with the service user |
| 5 | No instruction held, for AUDDIS service users only |
| 6 | Signature on the mandate is fraudulent |
| 7 | Claim raised at the service user's request after the direct debit was applied |
| 8 | Service user name disputed |
Codes 1 and 2 are the two you have real control over, and both are about notice. A collection that matches the amount and date you told your customer about, with a record of having told them, is the position you want to be in before a claim ever arrives.
Note also that one provider publishes this same eight-code set under an ADDACS heading, while four others publish it as indemnity claim codes. If a numbered code in this range turns up in a report, ask your provider which service it came from.
How long you have to challenge
We can't give you one number here, because the published figures don't agree with each other. Rather than pick the one we like, here's what each source says.
| Source | What it publishes |
|---|---|
| GoCardless | 9 days to challenge the claim, and 14 days before the paying bank reclaims the amount if it hasn't heard from you |
| A major UK provider's article | Nine days to challenge, with an automatic debit if you don't dispute or the challenge fails |
| The same provider's challenge process page | 6 working days, after which "the indemnity claims cannot be challenged" |
One provider contradicting itself across two of its own pages tells you something about how hard this is to pin down from outside the scheme. The document that would settle it, the DDIC challenge process guide, is published by Bacs to registered service users only.
Working practice, given all that: treat the window as days and not weeks, act on the day the claim reaches you, and ask your own provider for the deadline that applies to your submissions. Their answer is the one your challenge will actually be judged against.
The evidence a challenge needs
A challenge is an evidence exercise. GoCardless describes what's needed as evidence that the payment was extracted in accordance with the advance notice, which tells you the shape of it: you're showing that your customer was told what would be collected and when, and that you then collected exactly that.
Another provider lists the kinds of material it accepts, including email conversations confirming the direct debit was set up and call recordings of the customer confirming the mandate over the phone.
That gives you a practical checklist to keep in reach:
- The mandate itself, with the date and the method by which your customer set it up.
- The advance notice, showing the amount, the date and where it was sent.
- Proof of when the notice went out, since 10 working days is the scheme's default and you may need to show you met it.
- The collection record, showing what you actually took and on which date.
- Any email or recording where your customer confirmed the arrangement.
- Anything showing an agreed change, if the amount or date moved.
Where you're collecting a variable amount each month, the notice becomes the whole defence, so a system that sends it automatically against the invoice you raised does more for you than a well-organised folder. On Adfin the notice is generated from the invoice, which means the record exists before anyone knows they need it.
What Bacs publishes, and what it doesn't
The public Bacs page on indemnity claims is short. It gives you the principle, that paying banks are required to refund a payer in the event of an error under the Guarantee, and the note that the indemnity claim process may be used depending on the error.
Everything below that is gated. Handling indemnity claims, the DDIC challenge process service user guide, the FAQs, the research findings, the Little Bacs guide to minimising indemnity claims and the best practice sheet all sit behind a login for registered service users.
That's why guidance on this subject varies so much between providers, and why we've reported a range instead of a deadline. If you're a registered service user with your own Service User Number, you can read the primary documents. If you collect through a provider, your provider's rules are the ones that reach you, and asking them directly beats reading a third party's summary of a document neither of you can open.
How often claims come in
Indemnity claims occupy far more space in people's heads than in their reports. Across our own mandate book, of the cancellations that carry a specific reason code, dispute-related reasons account for 6 out of 816 (Adfin platform data).
Read that with its caveat: only 3.4% of cancellations carry a specific code at all, so this is the coded minority and not the whole book. Even so, the direction is clear enough to plan around. Cancellations are dominated by ordinary events, the payer cancelling at their bank and the account closing, and disagreements barely register.
So the proportionate response is a light one. Keep the evidence a challenge would need, because keeping it is nearly free once the process produces it for you. Give a claim a same-day look when one does arrive. Beyond that, the advance notice and the collection date doing what you said they would prevent more claims than any amount of preparation for arguing about them.
Common questions
What is a direct debit indemnity claim? It's the process by which a payer's bank recovers money from you after refunding your customer under the Direct Debit Guarantee. Bacs states that paying banks are required to refund a payer in the event of an error, and that the indemnity claim process may be used depending on the error.
Can I stop the money being taken from my account? Only by challenging successfully, and quickly. Provider guidance says the bank takes the payment automatically if you aren't disputing the claim or your challenge doesn't succeed, and GoCardless publishes 14 days as the point at which the paying bank reclaims if it hasn't heard from you.
How long do I have to challenge an indemnity claim? Published figures disagree. GoCardless says 9 days, one provider's article says nine days, and another page on that same provider's site says 6 working days, after which a claim cannot be challenged. The Bacs challenge process guide that would settle it is behind a login, so ask your own provider for the deadline that applies to you.
What evidence do I need to challenge a claim? Evidence that the collection matched the advance notice you gave: the mandate, the notice itself with its amount and date, when it was sent, and what you then collected. Providers also accept emails confirming the mandate was set up and call recordings of a customer agreeing to it.
Does an indemnity claim mean I've lost the money for good? No. The refund reverses the payment, but the underlying debt is unaffected, so if the amount was genuinely due you can pursue it as you would any unpaid invoice. The Direct Debit Guarantee itself says a payer who receives a refund they aren't entitled to must repay it when asked.
How common are indemnity claims? Rare, on the evidence we can see. Of the cancellations on our book carrying a specific reason code, 6 out of 816 relate to disputes. That covers 3.4% of cancellations rather than all of them, so treat it as an indication of scale.
Sources
- Bacs — indemnity claims (accurate as of August 2026)
- Pay.UK — how to claim a direct debit refund (accurate as of August 2026)
This article explains how the direct debit indemnity claim process works and is not legal or financial advice. Last updated August 2026.
