A new fitness studio is choosing how to collect monthly membership fees. Fig. 1 shows a direct-debit arrangement. Before the first collection, the member gi...
Question 1 Report
A new fitness studio is choosing how to collect monthly membership fees. Fig. 1 shows a direct-debit arrangement. Before the first collection, the member gives permission for the studio to request payment through the member’s bank. The studio may change the fee after giving notice, for example when the member adds a yoga class. The owner is comparing this method with a standing order, where the member sets up a fixed payment. She is also concerned that a failed payment could affect the studio’s ability to pay rent.
(a) Which party gives the authority for the direct debit in Fig. 1? [2]
(b) State two features of a standing order. [4]
(c) Explain why direct debit could be more suitable than a standing order when membership fees can change. [6]
(d) Outline two actions the fitness studio could take to reduce problems caused by failed monthly payments. [8]
Answer Details
(a) The member/customer gives the authority for the direct debit. [2]
(b) A standing order is set up by the account holder, sends a fixed amount, is paid on regular dates, and transfers money from one bank account to another. Any two. [4]
(c) Direct debit is more suitable when fees can change because, after giving notice, the studio can request the changed amount. This means the payment can match an added yoga class or revised membership fee. A standing order normally stays at the fixed amount until the member changes it, so it may collect the wrong amount. [6]
(d) The studio can contact the member promptly and request payment by another method. It should keep accurate bank and membership details, send a reminder before collection so funds can be available, and use a clear policy such as pausing access or applying a permitted late fee after a missed payment. Any two outlined actions. [8]
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