In October 2014, the European Payments Council ( ) published the document ‘Guidance for Direct Debit Business to Business ( ) Scheme Mandate Confirmations’. This document addresses the mandate confirmation requirements and operational implementation thereof prescribed in the Rulebook. The guidance aims to support scheme participants, i.e. payment service providers that have formally adhered to the schemes, to comply with the mandate confirmation requirements defined in the Rulebook.
The Scheme enables business customers in the role of debtors (payers) to make payments by direct debit. Services and products based on the Scheme are only available to businesses; the debtor must not be a private individual (consumer). In the Scheme the debtor (a business) is not entitled to obtain a refund of an authorised transaction.
The Scheme requires the debtor bank, (the bank of the payer), to ensure that the collection is authorised by checking the collection against mandate information. A mandate is signed by the debtor to authorise the creditor to collect a payment and to instruct the debtor’s bank to pay those collections. The debtor bank and the debtor are required to agree on the verification to be performed for each collection.
This means: the debtor bank must check whether or not a valid mandate is in place prior to executing an collection. The debtor bank has to obtain confirmation from the debtor on the mandate data received as part of the first collection prior to debiting the debtor’s account.
The document also reiterates that each mandate is identifiable based on the ‘unique mandate reference’. This mandate reference is assigned by the creditor (biller). It is recommended that the creditor indeed assigns unique, i.e. distinct, mandate references to separate mandates signed by the same debtor to authorise collections under the and the Schemes, respectively. The risk of not following such practice is that debtors who wish to block a collection by providing the unique mandate reference will block all other direct debits having the same mandate reference.
Last but not least, the document identifies mandate confirmation practices that are outside the scope of the Scheme.
Observing the principles reiterated with this guidance document should contribute to reducing the occurrence of R-transactions under the Scheme triggered in the event that the debtor bank does not obtain the required mandate confirmation from the debtor. (Possible exceptions to the normal execution of a direct debit collection include, for example, returns, rejects, refusals and reversals, commonly referenced as ‘R-transactions’ and described in detail in the Rulebooks.)
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