INDEMNITY CLAIM: Definition, History & How it Works

The Indemnity Claim is an essential part of the Direct Debit Scheme. It’s based on a mutual contract between two parties and the other where one promises the other to compensate for the loss through the payment of dividends. Under the Direct Debit contract, the Service User must agree to the Indemnity Claim process. This contract is unlimited in time and amount, so a Payer can always request a full and immediate refund from their paying bank. Below are more things you need to know about indemnity claims.

What Is The Indemnity Claim?

Indemnity means making payments to one party by the other for the loss that occurred. Furthermore, An indemnity claim is a contract agreement between two parties, where one party agrees to pay damages claimed by a third party.

For example, say you own a mini supermarket and you hire a snow removal service to clear your parking lot in the winter. You would likely want an indemnity in your contract that says the snow removal company will indemnify the supermarket for any claim made against the supermarket as a result of the nonperformance of their services.

What that means is that if the snow removal company does not clear the snow very well, and someone falls and sues the supermarket, it is the snow removal company’s duty to provide any financial compensation that is due.

Contrary, If you work at a digital marketing agency, and you’re producing advertisements for a client. Your client may tell you their product has A, B, C benefits and you include that information in the ad. But if it turns out the claims are untrue, you don’t want to be held accountable for that content if legal action is the result of a false claim.

History of Indemnity

Although indemnity claim agreements have not always had a name, they are not a new concept. Historically, indemnity claim agreements have served to ensure teamwork between individuals, businesses, and governments.

In 1825, Haiti was formed to pay France what was then called an “independence debt.” The payments were intended to cover the losses that French plantation owners “suffered” after losing land and slaves. While this form of indemnity was incredibly unjust, it is one example of many historical cases that show the ways indemnity has been used worldwide.

How Indemnity Works

An indemnity section is normal in the bulk of insurance agreements. However, exactly what is there, and to what extent, depends on the specific agreement. Any given indemnity agreement has a period of indemnity, or a specific length of time for which the payment is valid. Similarly, many contracts include a letter of indemnity, which guarantees that both parties will meet the contract stipulations 

Can an Indemnity Claim be Challenged?

Yes, The service user has the right to bring up an indemnity claim. Challenges occur when the service user renounces an indemnity claim received from a paying PSP before settlement of the claim.  In some cases, a paying PSP may contact the service user in advance of issuing a refund and request evidence before issuing the refund, but this is the choice of the paying PSP.

Direct Debit Indemnity Claim

An indemnity claim can prompt a reaction in the audience when being talked about in the world of Direct Debit.

In the world of “Direct Debit. Under the Direct Debit Rules, payment service providers are to refund a payer in the event of a mistake. Depending on the mistake the indemnity claim method may be in use.

Many consumers feel confident in using Direct Debit Indemnity Claim as a payment method. The Direct Debit Guarantee states that if a mistake is in the payment, the payer is to make an immediate refund. The Direct Debit Guarantee is as to time and amount. so an indemnity Claim can be at any time regardless of whether the payer is still a customer of the service user. If a payer requests a refund and there is an identifiable error, the paying PSP will issue the refund and this happens automatically within 14 working days of the date of the claim.

In the latter case, the bureau would then act to recover the refunded claim amount from its customer.

Furthermore. A payer is well within their rights to bring up an indemnity under the Direct Debit contract. And in most cases the paying PSP honors it.

Note: A Direct Debit Indemnity Claim must be up for the full amount of the original payment. But there is no Direct Debit Indemnity Claim time limit. The bank will be under the Guarantee to refund the Payer.

Direct Debit Guarantee Indemnity Claim process

• The Payer contacts their bank and asks for a full refund, the bank will consider the request. If the Indemnity Claim fulfills one of the criteria for a valid claim, they will refund directly to the Payer.
• Any false Direct Debit Indemnity Claims should not be ignored.
• The Service User then has a further 14 working days to raise a counterclaim, depending on the reason code
• The paying bank will consider any counterclaim and act within 90 days to settle or dismiss

Valid Indemnity Claim

There are valid reasons why a payer can request a Direct Debit refund.

The reasons are strictly on the administration of a Direct Debit by the Service User or Payer’s bank. The Payer, when approaching their bank, makes a refund request, as covered by the Direct Debit Guarantee. If the Payer reason is valid,

An Indemnity Claim must be for the full amount of the original Direct Debit. It cannot be for partial amounts. In most cases, the claim is put up by Payer’s bank. Therefore, the Services Users are also to raise Indemnity Claim on the Payer’s behalf. In addition, a Payer can claim for important loss. They will not give it back to the Payer until the paying bank has refunded the Service User.

The Direct Debit Contract

This is for customer protection. The contract is by all building societies and banks that accept direct debits Indemnity claim. As a customer, the Direct Debit contract protects you against payments made by mistake. This means Direct Debit is the safest payment method in the UK.

If a Direct Debit Indemnity Claim payment is taken by mistake, your bank will pay you back immediately.

To claim your refund:

Contact your bank in writing or over the phone to ask for a refund.

If they fail to give you a refund, contact them again in writing, explaining your situation to your Branch Manager. And also referring directly to the Direct Debit Guarantee.

How to Cancel a Direct Debit Indemnity Claim

You can cancel a Direct Debit indemnity claim at any time.

Your bank will generally need at least one day’s notice before the Direct Debit Indemnity claim is due.

Find out how much time your bank needs to process a cancellation, and leave it until the last minute.

You just need to let the person you are paying or your bank know that you want to cancel your Direct Debit indemnity claim. You can do this in writing. However, if you cancel using the phone or internet, you may also need to give written confirmation. You could do this by sending the organization a copy of the letter you send to your bank.

Remember: Cancelling a Direct Debit simply stops payments from going to the organization you are paying. If you carry on receiving the goods or service or if you have a contract then you will need to set up an alternative payment method.

The  Information you need to include to Cancel a Direct Debit Indemnity Claim?

Make sure you include:

• The name of the organization you’re paying.
• The name(s) of the account holder(s) for your bank account.
• Make sure of Your branch sort code.
• Your bank or building society account number.
• Reference to the organization (if known).s important.

The more information you can provide, the easier it will be for your bank to act. Therefore, if you know the amount and payment date, include it too.

What if the Direct Debit is not Cancelled?

Once you have a Direct Debit, make sure you check your bank statements to ensure your instructions are adhered to.

If your bank does not cancel your Direct Debit and payment is taken after you’ve asked for it to be canceled, you will be given an immediate refund from your bank under the Direct Debit contract.

 FQAs