Following publication of the first version in July 2014, the European Payments Council () released the updated version 2.0 of the document ‘Guidance on Reason Codes for Direct Debit R-transactions’ (see ‘related files’ below) on 5 May 2015.
To give some background: one of the main benefits of the Direct Debit () 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 Rulebooks).
The Core and 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 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.
The updated document ‘Guidance on Reason Codes for Direct Debit R-transactions’ reflects principal changes incorporated into the Core Rulebook version 9.1 and the B2B Rulebook version 7.1 to take effect in November 2016 (see ‘related links’ below):
- Core Rulebook version 9.1 introduces a shorter standard time cycle: as of the effective date of November 2016 of the Core Rulebook version 9.1, all collections presented for the first time, on a recurrent basis or as a one-off collection can be presented up to one interbank business day prior to the due date.
- Core Rulebook version 9.1 and B2B Rulebook version 7.1 have been amended to simplify the use of sequence types: the Rulebooks currently require that the payment message sent by the creditor’s bank to request a direct debit collection specifies whether the transaction is a first, one-off, recurrent or last collection. These specifications are also referred to as ‘sequence types’. The Core Rulebook version 9.1 and B2B Rulebook version 7.1 have been amended to simplify the use of sequence types by making the sequence type ‘first’ optional.
Section 4 of the document ‘Guidance on Reason Codes for Direct Debit R-transactions’ provides guidance to scheme participants on the reason codes to be used to report specific collection issues. This section has been updated with regard to the description of the use-cases for the reason codes AG02 (‘bank operation code specified in the message is not valid for receiver’), FF05 (‘local instrument code is missing or invalid’), MD07 (‘end customer is deceased’) and MS03 (‘reason has not been specified by agent’).
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