Has someone setup a fraudulent direct debit on your account?

Although in recent weeks my Monday blog has often been filled by one of my other writers or with a guest post, this week I wanted to share something that I heard on the news over the weekend because I feel as many people as possible need to be warned about a scam that has been hitting the bank accounts of several individuals.

What is the scam?

The scam basically involves people very easily being able to setup up a direct debit on your account to pay for goods or services that they have purchased or subscribed to and here’s the kicker, they can even do it using their own name and address.


When someone sets up a direct debit – which I’m sure you’ve done many times yourself – you are asked to hand over certain personal details which usually include the following:

  • Your name
  • Your bank account number
  • Your sort code
  • The address of your bank (Easily accessible online)

Firstly you’ll notice one very important piece of information missing from this list the makes the direct debit scheme so vulnerable to fraud, your address. Let’s imagine that a fraudster walks into a store to purchase a mobile phone on contract. They pay for the mobile phone in cash but they are then asked to setup a direct debit to cover the monthly contract payments. They fill out the direct debit mandate but instead of using their own account details they use yours instead, remember they have paid in cash for the phone so may not have had to show any further proof of identification. When the bank receives these details electronically, they appear to be correct and so the bank treats them as a legitimate request and automatically sets up a direct debit on your account to pay for the fraudsters contract.

It gets worse 

If you’re feeling outraged by how easy it is for someone to setup a direct debit on your account using your name, how might you feel to discover that they are even able to do it using their own name? Well that’s exactly what is happening today due to the widespread use of electronic direct debit mandates.

Back in the good old days of human banking, when a bank clerk received a request to authorise a payment from the account, they would very easily have been able to verify that the identification details being presented on the mandate actually matched the details on the account. Now that most direct debits are set up automatically though, it transpires that BACS (The people who run the Direct Debit System) actually have no way of checking whether the name that is used to setup a direct debit matches the name of the bank account holder. So what are we saying here?

We are effectively saying that a fraudster can very easily setup a direct debit to come out of your account to pay for goods or services that they have bought or subscribed to and they can do so using their own name and their own address. All they need is your bank account number and sort code which very handily sits on the front of many debit cards.

Check your statements regularly 

For the time being there is absolutely no system in place to prevent this kind of fraud from taking place and it doesn’t seem that there will be one implemented any time soon. So what can you do to protect yourself from this kind of direct debit fraud?

The only thing you can realistically do to protect yourself is to check your statement every month – or if you bank online as frequently as possible – to try and catch any unauthorised direct debits and then cancel them as soon as possible. You may think that you have things pretty much covered but most of us have so many small amounts regularly leaving our accounts these days that it is easy to become complacent. Remember though that it’s small amounts that are usually targeted by fraudsters to take your money because they are so easily missed.

Have you been a victim of direct debit fraud or do you know someone who has?  

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3 Responses to Has someone setup a fraudulent direct debit on your account?

  1. I’ve never heard of this. It’s crazy how easy it direct debit can be set up. I always make it a point to look over my statements. I never trust that it is right and question many things. I live by the motto that no one cares about my money as much as me.
    Jon @ MoneySmartGuides recently posted..Fast Food Workers Pay: How Much is Enough?My Profile

  2. Wow, Adam, I was not aware of this! I’m usually pretty good about keeping an eye on the bank accounts, but I’ll be extra careful now. Thanks for sharing this!
    Laurie @thefrugalfarmer recently posted..Using Hope to Reach Your Financial GoalsMy Profile

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