This month (February) UK’s Bacs introduced changes to the way in which paperless direct debit mandates are treated.
To help their clients understand the changes better. Dealflo has written a White Paper: Financial agreement automation and paperless direct debit mandates - general guidance. The paper offers a set of best practice guidelines with the intention of steering financial institutions towards adopting practical automation solutions that mitigate DDM, legal and compliance risk.
Bacs is the organisation with responsibility for the schemes behind the clearing and settlement of UK automated payment methods Direct Debit and Bacs Direct Credit, as well as the provision of managed services for third parties.
The aim is for Paperless Mandates to be capable of offering the same level recourse in the event of a counterclaim, as that provided by Paper Mandates. Prior to the changes, with Paperless Mandates the lender was unable to get the bank to reinstate a mandate once it had been cancelled by the customer – unlike Paper Mandates.
However, the recourse for Paperless Mandates will not be automatic – it will be subject to the evidence underpinning the mandate process.
The fact is that “legality” alone does not guarantee the enforceability of, or compliance of, an electronic agreement or the recourse of the DDM on a counterclaim.
The White Paper includes sections dealing with best practice protocols for legal enforceability/compliance covering what Dealflo defines as the “4 Is”:
● proving the identity of your customer: Establishing, then retrospectively proving, the identity of a contracting party, utilising “know your customer “ and “ prove your customer” data;
● proving your customer’s intent: Establishing exactly what the customer was looking at during the signing process. Did they observe the terms & conditions, download the document as well as spending an adequate period of time reading the contract?
● proving the intelligibility of the process: Demonstrate all actions the customer undertook during the process of signing. Most technical evidence is complex, fragmented and difficult to gather. Evidence should be simple and non-technical and include things like a screen image, pdfs, videos and printouts, thus ensuring a legal challenge is simple to assess;
● proving the integrity of the contract: Demonstrating that evidence is derivative of a specific transaction and that transaction only. All the evidence should be in a single, tamper-evident package and sealed with a digital signature.
The paper also considers the access to, and use of, evidence together with the ability to easily find, retrieve and successfully utilise evidence.
As the white paper’s authors say: “Whilst the approach to electronic evidence outlined within this document is arguably more robust and comprehensive than many existing Paperless Mandate processes, it need not necessitate a complex or onerous user experience.
“The majority of the verification checks, evidence recording and tamper-proofing measures sited can take place in the background during the application or signing processes.”
They add: “As many UK financial institutions have already discovered, it is now possible to automate the financial agreement processes, including the direct debit mandate, in a way which marries a seamless user experience with robust legal, compliance evidence and maximised recourse in the event of a counterclaim.”
To download a copy of Dealflo’s White Paper Financial agreement automation and paperless direct debit mandates - general guidance click here: