Guidance

Universal Credit: Third party payments creditor and supplier handbook

Updated 24 July 2024

The aim of this handbook

The aim of this handbook is to provide an overview of how the Third Party Deductions Scheme works for organisations and individuals (referred to as creditors or suppliers) who receive third party payments.

Please circulate to all relevant parties within your organisation.

The payment procedures are complex because of the requirement to manage millions of different transactions each year. The following pages aim to improve understanding of the procedures and help ensure that payments are made on time and are for the correct amount in all cases.

We are always happy to receive any suggestions or comments that will help us to improve the service we provide.

Introduction

DWP customers in receipt of certain benefits or credits may have deductions taken from their benefit and paid direct to a creditor/supplier under the Third Party Deduction Scheme. The government recognises the importance of safeguarding the welfare of claimants who have incurred debt. Under Universal Credit there is a co-ordinated approach to deductions from benefit, which supports claimants to manage their financial obligations. The actual payment of monies owed to you, the creditor/supplier, and paid on behalf of the DWP customer is known as a third party payment.

The Third Party Deduction Scheme should only be used when all other avenues of recovery have been exhausted.

Read more information about Universal Credit.

Types of arrears recovered from benefit

Arrears that can be recovered under the scheme include:

• housing rent arrears – from 23 February 2022 the way we pay rent arrears to Private Landlords changed
• fuel costs (for customer’s current provider)
• Council Tax or Community Charges
• unpaid fines or compensation orders
• water and sewerage charges (for customer’s current provider)
• child maintenance

Under Universal Credit we will not deduct an amount for current consumption costs of fuel or water where the household does not have arrears.

Third party deductions are made according to a priority order. The amount you receive will depend on whether other deductions we take have a higher priority. A maximum of 3 third party deductions are taken from each payment of benefit.

The priority order differs between different benefits. If you require more specific information, please contact your customer’s benefit office.

How the scheme operates

Arrears payments

Once payments are set up on the third party payments system, you, the creditor/supplier, will normally receive payment every 28 days and will be 28 days in arrears. Creditors will usually expect to receive the first payment for a customer on your next payment schedule within 6 weeks from the date deductions have commenced.

As such you will receive 12 payments in a calendar year. This is because assessment periods for Universal Credit are calendar monthly – therefore we assess what deductions can be made from Universal Credit 12 times each year at the end of each assessment period. Consequently, there will always be one 28-day payment cycle each year that does not align with the assessment of deductions from Universal Credit. When this is will depend on the date of the assessment period for a particular customer and the specific dates that apply to the creditor for a particular debt: the date of the assessment period depends on the date of the claim.

The payment you receive may change from month to month depending on what other deductions are made according to the priority order.

A BACS (Bank Automated Clearing System) payment will be made into the bank account nominated by you, the creditor/supplier.

Housing cost (APA) payments

Your housing payments will be paid directly to you from Universal Credit. They are paid monthly, in line with the Universal Credit benefit payment cycle. If you wish to query APA, you must contact Universal Credit directly.

For further information, please refer to the Universal Credit and Rented Housing: Guide for landlords.

Responsibilities

As a creditor/supplier, you are responsible for:

• making new applications for deductions, which should be done through GOV.UK, by searching for Universal Credit and landlords
• checking the details contained in your set up notification are all correct – please notify us of any discrepancies or amendments required, contact details will be on the top right hand corner of the notification
• informing Universal Credit of any changes and requesting any amendments to deductions from benefit, for example to end or change deduction amount required, contact details will be on the top right hand corner of the notification – failure to do so could result in unnecessary over deductions from the customer’s benefit
• informing the DWP Third Party Payments team of any amendments required to a customer reference number, on the appropriate form
• allocating all payments to the correct customer account(s) promptly on receipt of your payment schedule and ensuring that any unidentified payments are dealt with as soon as possible – it is important to note that we are unable to deal with queries relating to anything more than 12 months old
• notifying Universal Credit of any overpayment of deductions from benefit
• informing the DWP Third Party Payments team promptly of any changes to your name, address (even if receiving electronic schedules) or bank account details for payments made through the Third Party Payment scheme every 28 days
• Informing Universal Credit of any changes to bank account details for any direct rent payments you are receiving from them

Failure to do this may result in payments being made into an invalid/closed account.

The Universal Credit Service Centre in DWP will:

• agree to third party deductions with the creditor and customer and obtain relevant details to set up new creditors/suppliers on the third party payments scheme if not already set up
• amend and terminate deductions from benefit on behalf of customers and creditors/suppliers
• calculate and pay any underpayment/missing payments of deductions from benefit to the creditor/supplier
• calculate and recover any overpayment of deductions from benefit made to the creditor/supplier
• deal with any queries from benefit customers relating to third party deductions
• will update bank account details for any direct rent payments they are making to you

The DWP Third Party Payments team will:

• allocate a creditor/supplier number to all new creditors/suppliers set up by the Third Party Deduction team within Universal Credit Service Centre
• maintain the creditor/supplier records with name, address, contact and bank account details for payments made through the Third Party Payment scheme every 28 days when notified
• pay deductions from customer’s benefit to the creditor/supplier, on behalf of the Third Party Deduction team
• deal with queries from creditors/suppliers relating to payment schedules
• refer creditor/suppliers to the relevant Third Party Deduction team to resolve queries regarding the setup of deductions
• recover any overpayments of deductions from benefit made to creditor/suppliers on behalf of the Third Party Deduction team or Universal Credit Service Centre within DWP

Payment adjustments

An adjustment becomes necessary when we are not notified of a change in deductions until after the relevant payment has been made to you, the creditor/supplier.

Occasionally deductions may change depending on other deductions and their respective priorities.

It is your responsibility to notify the relevant section if:

• a debt has been fully recovered or if there is any change that affects the amount of debt that we were originally asked to recover
• an overpayment is made or monies are paid to you in error (not one of your customers)

Please do so by phoning Universal Credit on 0800 328 5644. They will then make the necessary adjustment to both the customer’s and your accounts.

Please do not:

• repay this money to us by cheque
• repay this money to us by bank transfer
• repay any money to your customer
• transfer the money to another organisation where you deem the money should have been paid

It is a condition of the scheme that DWP will recover any monies overpaid or paid in error by adjustment on a future schedule. This is to ensure that the customer’s account is credited with any monies deducted in error.

Changing a customer reference number

The payment schedule you receive will show the customer’s reference number. This is the number you have allocated to the customer.

Please note Universal Credit customers having deductions taken for rent will have RA (for rent arrears) or MP (for managed payment) as a suffix to their customer reference which cannot be removed.

If the customer reference number needs amending, you will need to inform the DWP Third Party Payments team on the customer reference amendment form ePRS03 by emailing it to:
[email protected]

This form should be used for customer reference amendments only and must include the ‘Owning Office Ref’ which can be found on your bulk schedule against each customer.

Changing creditor/supplier details

If you change the name or address or bank account for your payments received through the Third Party Payment scheme every 28 days, you will need to inform the DWP Third Party Payments team on the relevant creditor/supplier changes form and email it to: [email protected]

If you change the bank account details for your direct rent payments you will need to contact Universal Credit on 0800 328 5644.

If you take over, or merge with, another company and wish your customers to appear on only one schedule, you must take the following action:

• contact Universal Credit on 0800 328 5644
• ask them to end deductions under the old creditor/supplier number
• ask them to set up the deductions under the chosen creditor/supplier’s details for each customer affected
• once all your customers have been transferred, you must email the DWP Third Party Payments team and ask them to close the account, email: [email protected]

Payment schedules

Paper payment schedules

Payment schedules are produced and issued by post or electronically (if set up for electronic schedules). Schedules provide the total direct payment that will be made and contain a full breakdown of each customer’s account due for payment. If you currently receive your monthly schedule by post, you should allow 5 working days from receipt of payment into your bank account for your schedule to arrive.

After that period, if the schedule has still not arrived, you should contact the Third Party Payments team to report non-receipt of the schedule. We will then arrange for a duplicate schedule to be posted to you.

In line with DWP security procedures, we are not able to fax or email duplicate payment schedules and can only post them out to the address details currently held on our system.

We will normally accept requests for duplicate payment schedules for up to 3 months after the payment had been made. Requests for schedules older than 3 months will be considered on an exceptional basis.

Electronic payment schedules

The facility to send payment schedules securely electronically is available. This service is generally for creditors who have multiple customers, but any creditor/supplier may apply to be considered.

For an information pack, please email:
[email protected]

Once you have read and chosen to change your delivery method then complete the form within the pack and send it to:
[email protected]

If you already receive your monthly schedule electronically, you should allow 24 hours from receipt of payment into your bank account for your schedule to arrive.

After that period, if the schedule has still not arrived, you should email:
[email protected]

We will then arrange for a duplicate schedule to be sent. Please note all local authorities receiving electronic schedules through Transfer Your File should email:
[email protected]

When requesting a duplicate schedule, please include:

• your relevant creditor or supplier number
• your BACS reference number
• the amount and date of the missing schedule

Information found on the payment schedule

Information found on the payment schedule includes:

• owning office ref – customer’s UC Service Centre ID
• our ref – National Insurance number of customer
• customer ref – this is the number allocated by you, the creditor/supplier, and can be a maximum of 18 alpha numeric characters – Universal Credit customers having rent deductions taken will have RA (for rent arrears) or MP (for managed payment) as a suffix to their customer reference and this cannot be removed
• period – the dates the deduction relates to
• amount – the total payment due, the number of assessment periods x the monthly payment (£)

At the end of the schedule the following paragraph may appear if any recoveries have been made:

The following amounts have been incorrectly credited to your organisation. As a result, they are being deducted from our latest payment to you.

Specific details, similar to those provided for the original payment, are given for each transaction being recovered. Therefore, the amount of the payment due, less any recovery being made, will equate to the payment credited to your bank account.

Your creditor/supplier number will be quoted on the first page of your schedule.

Data protection (GDPR)

The General Data Protection Regulations prevent us from providing you with certain customer information.

We are able to confirm but not provide customer address details, National Insurance numbers and dates of birth. We are unable to provide or confirm if the customer is in receipt of benefit.

We are able to provide you with a customer’s full name and contact telephone numbers for their DWP Benefit Delivery Centre, Pension Centre or Universal Credit Service Centre.

Also please be aware that data protection restrictions and DWP security procedures prevent us from providing you with the bank account details or address we currently hold for your organisation. It is your responsibility to ensure that you hold a full record of all the bank account details that you have provided us with. This procedure is to protect and safeguard against any bank account details being given out to an inappropriate person or organisation.

The payment schedule that we issue is for your company’s use only and due to the customer information it contains, it should not be shared with the benefit recipient or any other outside party

The Third Party Deductions Scheme is operated in accordance with the Social Security (Claims & Payment) Regulations 1987, Regulation 35(1) and Schedule 9 and the Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013, Regulation 60 and Schedule 6.

Useful contacts

Before contacting Universal Credit or Third Party Payments, please check:

• if your query is answered in this guidance
• any payment queries with your own finance teams

Private landlord payment queries

From 23 February 2022 the way we pay rent arrears to Private Landlords changed. All new applications for rent arrears from Private Landlords are now made by Direct Payment from Universal Credit. All existing rent arrears deductions will continue to be paid via third party payments until they reach conclusion. Note, this change does not affect Social Rented Sector Landlords.

Private Landlords need to contact Universal Credit for all queries concerning housing costs and rent arrears being paid via direct payment.

Phone: 0800 328 5644
Monday to Friday, 8am to 6pm

Other creditor and supplier payment queries

Other creditors and suppliers who have a query about rent arrears payments and other third party payments deductions should email Third Party Payments using the Third Party Payments enquiry form. The email address is in the form.

Fill in the:

• Third Party Payments enquiry form (Word file)
• Third Party Payments enquiry form (open document text file)

Please do not give the Third Party Payments email address to benefit claimants.

To comply with data protection regulations, only provide the minimum of customer information required in the form.

Third Party Payments cannot deal with enquiries from:

• claimants
• creditors who do not yet have a Third Party Payment creditor reference number
• Private Landlords querying a direct rent payment or a rent arrears payment which is not being paid via a 4-weekly schedule

Change of address forms

Fill in the:

• form to change the name or address of a creditor or supplier (Excel)
• form to change the name or address of a creditor or supplier (open document spreadsheet)

Email the form to: [email protected]

Change of bank forms (only for payments made through the Third Party Payment scheme every 28 days)

Fill in the:

• form to change the bank details of a creditor or supplier (Excel)
• form to change the bank details of a creditor or supplier (open document spreadsheet)

Email the form to: [email protected]

Customer reference forms

Fill in the:

• form to change customer reference numbers (Excel)
• form to change customer reference numbers (open document spreadsheet)

Email the form to: [email protected]