News

Chuggers drive up direct debit failure and charity costs

Karl Flinders

Thousands of people approached by charity fundraisers in the street are deliberately giving incorrect direct debit details, costing charities up to £50 a time.

According to research from automated payments software supplier Bottomline, 6% of consumers deliberately fill in direct debit details incorrectly. Last year there were six billion automated payments, including direct debits and direct credits, worth £4.3tn.

chugger.jpg

The trend has been driven by the proliferation of so-called "chuggers" ("charity muggers") who work for charities and approach potential donors in the street with a view to donating through repeat direct debit payments. 

Chuggers raised £186m for UK charities last year. But organisations lose substantial amounts through processing costs because of incorrect details submitted at the point of the donor signing up.

“Extraordinarily, 6% of consumers admitted to intentionally completing a direct debit mandate incorrectly, with 45% of these putting the wrong bank account number and a third giving the wrong sort code or address details,” said the report.

Although the practice of using street fundraisers was not identified in the research as the cause of the processing costs, a source said this was a major contributor.

Research from payment processor Bacs last year found the cost to business of a failed direct debit set-up amounted up to £50 each time. 

Deliberate or accidental mistakes are only spotted when the bank account and individual are verified at a later stage, unless there is real-time verification. But only 10% of organisations use systems with real-time verification at the time of sign-up.

According to Bottomline’s research, 43% of business finance departments spend 4 hours a month fixing direct debit problems and 11% said they spend over 10 hours doing so.

 


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