European Payments Council publishes the document, entitled: 'Clarification Paper - Credit Transfer and Direct Debit'
The Single Euro Payments Area ( ) payment schemes as defined in the Credit Transfer ( ) and Direct Debit ( ) Rulebooks contain sets of rules and technical standards for the execution of payment transactions that have to be followed by adhering payment service providers ( ). These rulebooks can be regarded as instruction manuals which provide a common understanding on how to move funds from account A to account B within . The schemes are based on technical standards defined by standards bodies such as the International Organization for Standardization. The Schemes have open access criteria in line with Article 28 of the Payment Services Directive (PSD). As of January 2013, 4,539 in the 32 countries have formally adhered to the Scheme; 3,886 have signed up to the Core Scheme; and 3,427 also currently adhere to Business to Business (B2B) Scheme.
In January 2013 the European Payments Council ( ) published the document 'Clarification Paper: Credit Transfer and Direct Debit' (see 'related links' below), which addresses operational aspects related to the schemes. The paper seeks to ensure consistent implementation of the and Rulebooks by payment service providers participating in the schemes. The document provides guidance and, where feasible, recommendations to scheme participants on how to handle situations that are not described in the rulebooks. It will be updated from time to time, as required.
Operational aspects addressed in the clarification paper
The clarification paper (the paper) covers the following aspects:
Character set: part of a payment instruction is information facilitating reconciliation of the payment on the side of the receiving party such as the name of the payer or the reason for payment. The and Schemes require such information to be provided using Latin characters. The paper clarifies that bilateral or multilateral agreements between may exist to support other characters as well (German 'Umlaute', for example).
Pre-notification: the Schemes require the biller to send a pre-notification, an invoice for example, to the payer at least 14 calendar days before collecting the payment, unless a different timeline has been agreed between the payer and the biller1. The pre-notification includes the due date2 and the amount of the collection. The pre-notification may be sent only once even for recurrent direct debit collections if the due dates and the amounts of future collections are stated. For example: a publisher (biller) may send a single pre-notification annually to a newspaper subscriber (payer) if this pre-notification states that the amount of the monthly subscription fee will be collected on the first day of each month. The paper clarifies that the pre-notification can take place via a paper-based document or by electronic or telecommunication means. The paper also reiterates, as mentioned above, that the biller may agree with the payer to send the pre-notification according to an alternative timeline than the default 14 days prior to the due date. It is further clarified that if the biller does not notify the payer in a correct manner of the upcoming collection, there is an increased risk of return or refund of the collection.
Sequence types for collections: the paper addresses several questions raised by concerning collection sequence types; i.e. the Core and B2B Scheme timelines. The standard time cycle of the Core Rulebook requires that the payer's bank must receive the request for a first direct debit collection or for a one-off direct debit collection at least five business days prior to the due date. For subsequent direct debit collections, the payer's bank must receive such a request at least two business days prior to the due date. The standard time cycle of the B2B Rulebook requires that the payer's bank must receive the request for a first, one-off or subsequent direct debit collection at the latest one inter-bank business day prior to the due date. Responding to the specific needs of the business community, the B2B Scheme offers a significantly shorter timeline for presenting direct debits and a reduced return period than the Core Scheme. The reason for the shorter timelines of the B2B Scheme, compared to the Core Scheme, is that business payments by direct debit require a timely certainty about the finality of the payments, so that goods or services can be delivered whilst minimising financial risks and costs for the payee. For business transactions, which do not require this certainty, the Core Scheme can also be a satisfactory solution for making payments. The paper reiterates that, as a matter of principle, the first collection must always be received before the recurrent one. The due date of the recurrent collection must not be a date prior to the due date of the first collection.
R-transactions: one of the main benefits of the Schemes is that the scheme rules streamline exception handling, both at the process level and the 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, reversals, revocations and requests for cancellation (commonly referenced as R-transactions). Factors which may trigger an R-transaction include technical reasons or may be related to the financial status of the account of the payer. An R-transaction may also be triggered when the payer exercises its right to a refund. The Core Scheme goes beyond the requirements of the Payment Services Directive (PSD), by granting consumers a 'no-questions-asked' refund right during the eight weeks following the debiting of a consumer's account. This means that during this time, any funds collected by will be credited back to the consumer's account upon request. In the event of unauthorised direct debit collections, the consumer's right to a refund extends to thirteen months as stipulated in the PSD. The paper clarifies the rules applicable when re-presenting a collection previously rejected, refunded or returned and includes a detailed table, which specifies the correct sequence type when re-presenting a collection after an R-transaction has occurred.
Currency conversion: payments can be made to or from any accounts that are held with a located in . It is not necessary that the payer and / or the recipient of the payment have an account in a country that has already adopted the euro as its national currency. The paper clarifies that the exchange of funds however always takes place in the euro currency; i.e. the payment is executed in euro throughout the entire process chain. Thecurrency conversion can only take place at the payee's or the payer's prior to, or subsequent to the transaction. In addition, it is clarified that in case of an recall, the payee's bank should not bear losses related to a currency conversion.
The Newsletter has published a host of articles with previous issues dedicated to supporting market participants in the process of implementing the and Schemes. For further information, please refer to 'related articles in previous issues' below.
Jean-Yves Jacquelin is the Chair of the Payment Schemes Working Group.
Related article in this issue:
SCT and SDD: the Next Generation Rulebooks Will be Published in November 2014 to Take Effect in November 2015. The process leading to the publication of new rulebook versions will roll out at the start of 2014
Related articles in previous issues:
1The technical terms used in the Rulebooks refer to the payer as 'debtor' and to the biller as 'creditor'.
2The due date is assigned by the biller and should be agreed with the payer in the contract underlying a direct debit collection (a newsletter subscription, for example).
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