Issue 11 - July 2011
SEPA Credit Transfer (SCT) & SEPA Direct Debit (SDD)
SEPA Direct Debit for Billers: the Creditor Identifier (Go Get It!)EPC Newsletter series provides support for billers preparing migration to the SDD Schemes
13.07.11 By Javier Santamaría and Herman Segers
This is the second article in a series which provides information on specific aspects of the SEPA Direct Debit (SDD) Schemes, relevant in particular to billers preparing for migration to SDD. In this context, the European Payments Council (EPC) invites readers to be mindful of expected forthcoming European Union (EU) Regulation, which will set a deadline for the replacement of existing national euro direct debit schemes by a harmonised European direct debit scheme. The technical reference for the biller in the SDD Scheme Rulebooks is the 'creditor'. Billers collecting payments under the SDD Schemes are obliged to obtain a so called creditor identifier. The creditor identifier, in connection with the mandate reference, allows the payer and the payer's bank to verify each SDD payment and to process or reject the direct debit according to the payer's instructions. Billers have to request this identifier according to local practice. Javier Santamaría and Herman Segers explain the structure of the creditor identifier.
Key Information in this Article
The SEPA Direct Debit (SDD) Rulebooks refer to the biller as the ‘creditor’. Billers collecting payments under the SDD Schemes are obliged to obtain a creditor identifier which relates to a legal entity, or an association that is not a legal entity, or a person assuming the role of the biller.
A new SEPA-wide creditor identifier solution is not required. Most national direct debit schemes already use defined identifiers. The SDD Schemes rely on the re-use of existing creditor identifiers.
A creditor identifier issued in one SEPA country can be used in all SEPA countries.
A biller may use more than one identifier if they so choose, however one creditor identifier must always be attributable to only one biller. This ensures that each biller collecting payments under the SDD Schemes within and across the 32 SEPA countries is unambiguously identifiable.
Billers have to request this identifier according to local practice. Normally, the creditor identifier will be obtained from the biller’s bank once the biller starts using the SDD Scheme(s).
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The SEPA Direct Debit (SDD) Schemes in a nutshell
The SEPA Core Direct Debit Scheme (SDD Core) and the SEPA Business to Business Direct Debit (SDD B2B) Scheme developed by the European Payments Council (EPC) - like any other direct debit schemes - are based on the following concept: 'I request money from someone else and, with his prior approval, I can credit it to myself'. The SDD Schemes, for the first time ever, enable consumers to make cross-border direct debit payments throughout the 32 Single Euro Payments Area (SEPA) countries1. At the same time, the SDD Schemes can of course be used domestically. The payer and the biller must each hold an account with a payment service provider (PSP) located in SEPA. The accounts may be in the euro currency or in any other currency. The transfer of funds (money) between the payer's bank and the biller's bank always takes place in the euro currency. Currency conversion aspects are out of scope of the scheme.
For more information on the SDD Schemes, refer to the EPC publication 'Shortcut to SEPA Direct Debit' (see 'related links' below). This four page publication summarises the main features of the SDD Schemes in non-technical terms, including their key benefits. Detailed information on the SDD Schemes is available on the EPC Website (see 'related links' below).
Billers collecting payments under the SDD Schemes are obliged to obtain a creditor identifier
The SDD Schemes allow a biller to collect funds from a payer's account provided that a signed mandate has been granted by the payer to the biller. A mandate is signed by the payer to authorise the biller to collect a payment and to instruct the payer's bank to pay those collections. The mandate can be issued in paper form or electronically. The mandate expires 36 months after the last initiated collection. Each mandate must include a so called 'unique mandate reference'. The biller must be able to provide a copy of a mandate identified by this reference upon request. The signed mandate must be stored by the biller as long as the mandate is valid and for at least 14 months after the last collection. The biller initiates the collection by sending the mandate-related data to his bank2. (Please see 'related articles in previous issues' below to learn more about the mandate as relevant for billers).
Payers are entitled to instruct their banks to refuse individual transactions. Many banks offer their customers automated facilities to introduce such a request. The efficient handling of a payer's request to refuse a direct debit collection from a specific biller is contingent upon the ability of the payer's bank to unambiguously identify this biller. This is not possible however, based on the name of the business which the biller represents. In many instances, the name of the business communicated to the customer is not the name of the business' legal entity. The fact that businesses operating in a specific sector such as, for example, telecommunications, use very similar names would also make it difficult to identify a biller based on the name of the business. Last but not least it has to be taken into consideration that enterprises operating in multiple countries often adapt the name of the business used in a specific market to the local language.
Billers collecting payments under the SDD Schemes are therefore obliged to obtain a creditor identifier which relates to a legal entity, or an association that is not a legal entity, or a person assuming the role of the biller. The SDD Rulebooks refer to the biller as the 'creditor'. The creditor identifier, in connection with the mandate reference, allows the payer and the payer's bank to verify each SDD payment and to process or reject the direct debit according to the payer's instructions. The identifier must be stable over time to ensure that a payer and the payer's bank can contact the biller if required. This may be necessary, for example, to verify the existence of a mandate or in instances of returns or refunds of a direct debit collection.
A pragmatic approach: the SDD Schemes rely on the re-use of existing creditor identifiers
A SEPA-wide creditor identifier solution is not required. Most national direct debit schemes already use defined identifiers. The SDD Schemes rely on the re-use of existing creditor identifiers. Countries using a national identifier which has insufficient capacity or is unsatisfactory for SEPA-wide use may define a new or adapted national creditor identifier. The creditor identifier uses, wherever possible, information available in the public domain. Most national creditor identifier solutions, for example, use the VAT number, Chamber of Commerce numbers, trade entity numbers or creditor identifiers issued by the national central bank or banking association. It is therefore not necessary to maintain a SEPA-wide centralised database containing all creditor identifiers and other data related to the biller.
A creditor identifier issued in one SEPA country can be used in all SEPA countries. A biller may use more than one identifier if they so choose, however one creditor identifier must always be attributable to only one biller. The creditor identifier therefore allows the unambiguous identification of any biller collecting SEPA payments under the SDD Scheme within and across the 32 SEPA countries. Billers have to request this identifier according to local practice. Normally, billers receive their SEPA creditor identifier from their bank once the biller starts collecting payments under the SDD Scheme.
Billers collecting payments under more than one national direct debit scheme today may already have several creditor identifiers. They are able to continue using these identifiers under the SDD Scheme if the continued validity of the underlying mandates so requires. Solutions to ensure the continued legal validity of existing mandates under the SDD Scheme have been implemented in all European Union Member States except Germany, to facilitate migration of bank customers to the SDD Scheme.
The SDD Scheme does not require that the biller maintains his bank account in the country where the creditor identifier was issued. Taking into consideration different bank practices however, billers are recommended to consult their bank in this matter. The existing creditor identifier can be maintained in the event that the biller changes his banking relationship.
The structure of the creditor identifier
The creditor identifier contains the following elements:
a) The International Organization for Standardization (ISO) country code of the country where the national identifier of the biller was issued, for example 'BE' for Belgium.
b) The check digit which allows verification of the ISO country code (item (a) above) and the country specific part (see item (d) below).
c) The extension, called 'creditor business code', which allows the biller to identify different business lines, services or activities. The creditor business code can be designed by the biller in a flexible manner to include information useful to both the biller and the payer. As unambiguous identification of the biller is not contingent upon the 'creditor business code', it is permissible to change the content of this element over time. The check digit (see item (b) above) does not verify the content of this element.
d) The country specific part of the creditor identifier is a national identifier of the biller as defined by a national banking community. In most countries, this national identifier contains a specific structure. As a result, this element of the creditor identifier varies across SEPA countries according to the structure established at national level.
The EPC document 'Creditor Identifier Overview' (see 'related links' below) offers basic information on the country specific part of the creditor identifier enabling creditor banks to check the validity of a creditor identifier. The detailed specifications of the creditor identifier, as relevant in particular for creditor banks, are set out in the 'SEPA Core Direct Debit Scheme Inter-Bank Implementation Guidelines' published by the EPC (see 'related links' below).
Javier Santamaría is the Chair of the EPC SEPA Payment Schemes Working Group. Herman Segers is the former Secretary General of the EPC. He also served as the editor of the SDD Rulebooks for many years.
The EPC Website features a section dedicated to SDD. To view this section, click here
EPC Publication: Shortcut to the SEPA Direct Debit
EPC Document 'Creditor Identifier Overview' (EPC262-08)
Related articles in this issue:
Related articles in previous issues:
SEPA Direct Debit for Billers: The SDD Mandate (EPC Newsletter, Issue 10, April 2011)
The Quantum Leap for SEPA Direct Debit. From 1 November 2010, all banks in the euro area are reachable for SEPA Core Direct Debit (EPC Newsletter, Issue 8, October 2010)
Have it Your Way! The EPC e-mandate option: a secure way to authorise a SEPA Direct Debit payment (EPC Newsletter, Issue 6, April 2010)
SEPA Survey 2009: Corporate Readiness on the Rise - The findings confirm that early movers have everything to gain (EPC Newsletter, Issue 5, January 2010)
Better Business with SEPA Direct Debit. Corporate customers confirm benefits of SEPA implementation (EPC Newsletter, Issue 4, October 2009)
Refunds and Returns Revisited. Questions and answers on the correlation between the PSD and the SDD Schemes (EPC Newsletter, Issue 4, October 2009)
Creditors: Help is Here. EPC introduces rules on the use of legacy mandates under the SDD Scheme (EPC Newsletter, Issue 2, April 2009)
1SEPA currently consists of the 27 EU Member States plus Iceland, Liechtenstein, Norway, Monaco and Switzerland.
2The term 'bank' is used in a non-discriminatory fashion and does not exclude payment service providers other than banks.
Other articles in this issue
13.07.11 What is Your View? - EPC invites stakeholders to participate in consultations on the SEPA Scheme Rulebooks and the SEPA Cards Standardisation Volume - Book of Requirements By Ugo Bechis and Javier Santamaría 13.07.11 EPC Goes Social - EPC invites stakeholders to connect to the newly launched EPC social media platforms By Gerard Hartsink 13.07.11 EPC Plenary Meeting Update - Main decisions taken in June 2011 By Gerard Hartsink 13.07.11 Change is Inevitable... - 'Except from vending machines' (Robert C. Gallagher): the impact of new standards proposed by the CPSS-IOSCO for financial market infrastructures on payment service providers By Dermot Turing 13.07.11 Get Ready for More - Basel III marks only the beginning of increased regulatory scrutiny of the payments market By Ruth Wandhöfer 13.07.11 A Closer Look at Innovation in Retail Payments - Central bank research in preparation: a report on first findings of working group established by the Committee on Payment and Settlement Systems By Dirk Schrade 13.07.11 Facing the Facts in July 2011 - The EPC Newsletter tracks the progress of SEPA migration By Gerard Hartsink 13.07.11 One Size Fits All - EPC launches an initiative to ensure the efficient management of the SEPA ATM infrastructure By Leonor Machado 13.07.11 Direct Debit: Killing it Softly - Reflections on the likely demise of one of the most popular payment instruments in Europe By Javier Santamaría 13.07.11 The Art of Integration - Finnish Government Shared Services Centre for Finance and HR simultaneously migrates to SEPA and new IT systems introduced at central government agencies By Mikko Grönman (Interview) 13.07.11 Arrested Development*** - Inconsistencies between European Commission´s objectives threaten to hamper SEPA progress By Gerard Hartsink
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