Standing Order in United Kingdom

Note: this entry is about a method of payment. There are other law meanings of standing orders, such us the government of contested cases assigned to administrative patent judges of the Board of Patent Appeals in the United States.

A standing order is an instruction you give to your bank to pay a fixed amount to someone else on a regular basis. You can set up, amend and cancel standing orders.

A standing order is a way of setting up a regular, fixed payment from your bank account.

A standing order is an instruction given to your bank to debit your account and credit your chosen account for a fixed amount on a set frequency (weekly, monthly, for example).

Standing order versus Direct Debits

A Standing Order is also an automatic regular payment but the amount is fixed.

Wikiped

A standing order (or a standing instruction) is an instruction a bank account holder (“the payer”) gives to his or her bank to pay a set amount at regular intervals to another’s (“the payee’s”) account. The instruction is sometimes known as a banker’s order.

They are typically used to pay rent, mortgage or other fixed regular payments. Because the amounts paid are fixed, a standing order is not usually suitable for paying variable bills such as credit cards or gas and electricity bills.

Standing orders are available in the banking systems of a number of countries, including Germany, the United Kingdom, Barbados, the Republic of Ireland, Netherlands, Russia, Pakistan and presumably many others. In the United States, and other countries where cheques are more popular than bank transfers, a similar service is available, in which the bank automatically mails a cheque to the specified payee.

Difference from direct debit

Standing orders are distinct from direct debits; both are methods of setting up repeated transfers of money from one account to another, but they operate in different ways. The fundamental difference is that standing orders send payments arranged by the payer, while direct debits are specified and collected by the payee.

A standing order can only be set up and modified by the payer, and is for amounts specified by the payer to be paid at specified times (usually a fixed amount at a specified interval). The amount can be paid into any bank account, which need not belong to an organisation vetted by the payer’s bank.
A direct debit requires the payer authorize the payee take a direct debit for any amount at any time, or to instruct the bank to honour direct debit requests from a specified payee. The payer has no direct control over these payments, but can cancel the direct debit at any time, with no reason required, and require the return of disputed payments. It is not possible to authorise an individual to take direct debits; only organisations that have a contract with the payer’s bank, or have been vetted by it, can do this. For details and country differences, see direct debit.

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A standing order is an instruction you give to your bank or building society to authorise a payment for set amount, usually on a regular basis, to be made to another UK bank or building society account. On the day specified, your account will be debited and the money transferred to the person or business receiving the money.
What would I use this for?

Standing orders are typically used when you want to pay a person or business a set amount on a regular basis. It can be made to any UK bank or building society account. Standing orders are typically used to make rent payments, pay magazine subscriptions, monthly charity donations or if you want to make a regular payment into a savings account. A standing order amount remains the same, unless you amend your instruction.

How do I use it?

You will need the account name, sort code and bank account of the person or business you want to pay. You will need to provide these details to your bank or building society.
You may also be asked to provide a reference so that the recipient will know what the payment relates to.
To ensure your payment is processed correctly it is extremely important that you provide the correct sort code and account number.
Any person or company with a current account can set up a standing order either online, over the phone or at a bank branch. They are set up for a set period of time (e.g. every month for a year) or until they are cancelled. There’s no charge for setting up a standing order but be aware that if a standing order payment makes you go overdrawn you may be charged interest.
From January 2012 the money will be transferred through through the Faster Payments Service. Until this it may have been processed via Bacs which meant it arrived with the recipient within three working days, e.g. for a standing order initiated on a Monday, it would arrive on the Wednesday. However, standing orders processed via Faster Payments will be processed on the same day.

Security

When you set up a standing order it is vital that you give the correct sort code and account number and name of the person/business you want to pay. If you give incorrect details your money may end up in someone else’s account and it may be difficult to get it back.
Consumer protection providing immediate refund will apply if you are an innocent victim of fraud – for instance if a fraudster made an standing order payment from your account. Your claim needs to be made within the 13 months of fraudulent transaction leaving your account. Payments require your authorisation in advance and your bank must tell you what information the payment will be processed on (e.g. account number and sort code). If you give the correct information and your payment goes astray your bank must make immediate efforts to trace the transaction and notify you of the outcome. In this case the transaction will be refunded. If you give incorrect information and the payment goes astray your bank must make ‘reasonable efforts’ to trace the transaction but may charge for doing so. However, they have no liability for getting the funds back. Claims must be made within 13 months.

Useful information

If paying a business, it is usually best to opt for a Direct Debit where possible as it offers better consumer protection.
You should always be careful to check the sort code and account details are correct for your payment you want to send.
Standing orders are different to Direct Debits as a standing order authorises the customer’s bank to send the money. A Direct Debit authorises the beneficiary to collectthe money from your account. Also with a Direct Debit the amount can vary but with a standing order it remains the same, unless you amend your instruction.
Account holders usually need to be 16 or 18 to use standing orders, but some accounts for younger people also offer standing order facilities, so check with your bank or building society.

See Also

Bacs
Direct Debit
CHAPS
Payment Methods
Faster Payments