EPC Guidance on Reason Codes for SEPA Direct Debit R-Transactions

Guidance documents
Direct debit

The European Payments Council () released the updated version 3.0 of the document ‘Guidance on Reason Codes for Direct Debit R-transactions’ (see ‘related files’ below) on 24 November 2016.

To give some background: one of the main benefits of the SEPA Direct Debit (SDD) schemes is that the scheme rules streamline exception handling, at both process and dataset level. This allows straight-through-processing and automated exception handling end-to-end. Possible exceptions to the normal execution of a direct debit collection include refunds, returns, rejects, refusals and reversals (commonly referenced as ‘R-transactions’ and described in detail in the SDD rulebooks).

The and SDD Business to Business (B2B) rulebooks specify reasons which trigger an R-transaction, i.e. data elements required to convey information to the payee (biller) with regard to the R-transaction. These data elements, which are referred to as ‘reason codes’, identify the type of the R-transaction; name the initiator of the R-transaction; and detail the reason for the R-transaction.

The correct application of these reason codes by a debtor bank (the bank of the payer), informing a creditor bank (the bank of the biller), about a failed SDD collection is crucial to allow the biller to determine its reaction. This means: in the event of a failed SDD collection, the debtor bank must send a message to the creditor bank, which includes the correct reason code so that the creditor bank can inform the biller accordingly. Scheme participants, i.e. payment service providers that have formally adhered to the schemes, are therefore reminded to apply the specific SDD R-transaction reason codes described in the rulebooks when reporting a failed collection.

The version 3.0 of the document ‘Guidance on Reason Codes for SEPA Direct Debit R-transactions’ reports principal changes incorporated into the SDD Core Rulebook and the Rulebook taking effect on 20 November 2016 (2016 SDD rulebooks) and on 19 November 2017 (2017 SDD rulebooks) respectively:

  • The removal of ISO reason codes and use cases related to SDD Core and COR1 collection time cycles as the standard SDD Core collection time cycle changes into D-1/D-1 for first and recurrent SDD collections as of 20 November 2016
  • The simplified use of SDD sequence types as of 20 November 2016 for SDD Core and SDD B2B collections
  • Inclusion of the approved 2016 SDD change requests on SDD r-transactions which become effective on 19 November 2017:
    • Reason code AG02 for ‘Operation code/ transaction code/ sequence type incorrect, invalid file format’ can also be used for the r-transaction type Return
    • Reason code MD07 for ‘Debtor deceased’ can also be used under the SDD B2B Rulebook

The 2017 SDD rulebooks also formally state that this guide prescribes which ISO code should be used for each of the reasons under each R-transaction type.

View the Spanish translation of the document made by the Spanish banking association.

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