SEPA Direct Debits (SDD) have many advantages for consumers: by automating the transaction, consumers avoid the risk of missing a payment deadline and of being charged additional fees for late payments, or suffering from an interruption of service.
They are especially useful for recurring payments, as they provide peace of mind for consumers. In addition, security is key: consumers enjoy a fast and simple refund procedure after a SDD was made on their account. SDDs also offer many benefits for businesses, such as efficiency gains – thanks to the automation of payment processing – and the optimisation of cash flow, as invoices are paid when they are due and can be directed to a single account. Lastly, by introducing a standardised payment instrument, the SDD schemes truly facilitate trade across Europe and contribute to the goals of the single market.
1
To pay his monthly electricity bill, Simon completes the direct debit mandate provided by his power company.
In both schemes, the biller requests money from the payer with their prior approval and the sum is credited to the biller’s account. To consent to the debit from their account, the payer has to sign a mandate prepared by the biller and issued in either paper or electronic format.
A SEPA direct debit can only be made in euros, but the accounts – which have to be located in SEPA – may be held in any other SEPA currency.
In both SDD schemes, it is the biller who is responsible for storing the original mandate (and any information regarding changes in the mandate or its cancellation). This situation, where the biller is responsible for the mandate, is called the ‘creditor-driven mandate flow’.
SDDs can be used for a one-off transaction and for recurring payments (for example, monthly electricity bills).
- The SDD Core scheme is mandatory for PSPs offering euro direct debit for consumers, whereas it is optional for PSPs to offer services based on the SDD B2B scheme.
- Under the SDD B2B scheme, the payer cannot be a private individual and must be a business customer. A private individual can, however, be a biller under the SDD B2B scheme.
- In the SDD B2B scheme, the payer is not entitled to obtain a refund for an authorised transaction. The payment is deemed final three business days after the debit date; within these three days, the payer’s PSP can still return the transaction for specific reasons.
- The refund rules are different in the SDD Core scheme.
- During the eight weeks following the direct debit date, the payer has the possibility of requesting a refund without having to provide any justifications. This is the right to a ‘no-questions-asked’ refund.
- If the transaction was unauthorised (i.e. the collection does not relate to the signed mandate), the payer can ask for a refund up to 13 months after the direct debit.
- To ensure that a transaction is authorised in the SDD B2B scheme, the payer’s PSP must check whether there is a valid mandate in place prior to executing the collection. The PSP of the payer must have obtained confirmation of the mandate data from the payer before debiting the account, and has to store this data for future verification purposes. The PSP of the payer then checks the first and subsequent collections against the stored mandate data and the related verification instructions received from the payer. Further information about the confirmation requirements and operational implementation is available in the EPC Clarification paper on SDD Core and SDD B2B rulebooks.
- In the SDD Core scheme, the PSP of the payer does not perform these mandate control and storage activities. It receives the mandate-related information with the first collection.
3
On the date agreed with Simon, his account is debited of the agreed amount.
He doesn't have any further action to take to pay his bill!
- PSPs must ensure that only trustworthy billers are allowed to use SDD. This is in the interest of the billers’ PSPs, as they would have to cover any losses resulting from fraudulent and / or erroneous direct debits. The risk of any fraudulent or erroneous SDD payment is borne by the biller's PSP – never by the payer.
- As each SDD mandate is uniquely identifiable (based on the combination of the 'Unique Mandate Reference' and the 'Creditor Identifier'), each SDD collection can be traced back – immediately and unmistakably – to the biller. As a result, any biller collecting SDDs can be rapidly and unequivocally identified.
- Payers can get their money back: in the SDD Core scheme, a refund is possible up to eight weeks after the transaction without supplying any justification; in the case of an unauthorised direct debit, a refund request can be made up to 13 months after the transaction.
- And finally, in the SDD Core scheme, any individual has the right to ask their PSP to add an extra layer of control. The payer can ask their PSP to block collections on their accounts through the use of whitelists or blacklists of billers, to set a maximum number of collections allowed within a certain period or a specific maximum amount per collection. These rights and others are listed in the SEPA Regulation.
In certain situations, the collection is not processed in the normal way. To handle these exceptions, PSPs send messages called ‘R-transactions’, as their names all start with an R: refusals, rejects, returns, refunds, reversals. The R-transactions contain reason codes – defined in the SDD rulebooks – which help the biller and its PSP to treat a failed SDD collection and to determine automatically their reaction. It is therefore important that all PSPs correctly apply the reason codes. More information is available in the document Guidance on reason codes for SDD R-transactions.