On 10 July 2014, the European Payments Council () published the document ‘Guidance on Reason Codes for R-transactions’ (see ‘related files’ below).
One of the main benefits of the Direct Debit () 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, refusals and reversals (commonly referenced as ‘R-transactions’ and described in detail in the Rulebooks).
The Core and Business to Business 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 collection is crucial to allow the biller to determine its reaction. This means: in the event of a failed 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 R-transaction reason codes described in the rulebooks when reporting a failed collection.
Section 4 of the newly published document provides guidance to scheme participants about the reason codes to be used to report specific collection issues.
The document ‘Guidance on Reason Codes for R-transactions’ also reiterates the timelines to be observed with the handling of R-transactions in line with the scheme rules. Last but not least, scheme participants are reminded that they must channel rejects, returns and refunds of collections through the same clearing and settlement mechanism used for clearing and settlement of the initial collection unless otherwise agreed between the scheme participants.
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