What is SEPA Direct Debit?
The European Payments Council (EPC) has established the single euro payments area (SEPA) to standardize cashless euro payments across Europe. It defines, among others, SEPA Direct Debit schemes (SDD): one primarily designed for B2C businesses (SDD Core), and one exclusively for B2B businesses (SDD B2B). The two schemes set common rules for transferring money from a debtor to a creditor, but vary in details (see SEPA Direct Debit).
SEPA Direct Debit is centered around a mandate, which allows the creditor to prove their request for collecting money. The collection is initiated by the creditor, submitting the order to their bank. The order includes information like mandate ID, amount, collection date and debtor IBAN. The bank then executes the order, withdrawing the money from the debtor's account and putting it to the creditor's account.
The common rules include:
- The mandate is signed by the debtor before the first transaction (typically 14 days before the first collection).
- The mandate allows one-off or recurrent collections and can be revoked by the debtor at any time.
- The due date of a collection must not be more than 14 days in the future.
Depending on the scheme (Core or B2B), various timeframes and rules apply for the debtor to object to the money transfer and to order a reverse transaction.
The SEPA Direct Debit Core scheme is mandatory for transactions with consumers (B2C) and optional for transactions with businesses (B2B). Under SDD Core, a debtor can request a refund ("no-questions-asked") within eight weeks of the collection date. In case of an unauthorized transaction – which must be proven –, a debtor can ask for a refund within 13 months of the collection date.
The SEPA Direct Debit B2B scheme is exclusively for businesses. Under SDD B2B, the debtor is not entitled to obtain a refund for an authorized transaction. The debtor's bank, however, may still return a transaction under certain circumstances within three days. To ensure that a transaction is authorized under SDD B2B, the debtor's bank must check whether there is a valid mandate before executing the collection.
Unless specifically agreed with the bank, JustOn Cash Management uses the basic character set defined by the European Payment Council when creating SEPA payment orders. For details, see SEPA Requirements for an Extended Character Set (UNICODE Subset) - Best Practices.
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This overview on SEPA Direct Debit does not constitute any legally effective advice. JustOn cannot and must not provide such services. For any detailed questions and current information on implementing SEPA Direct Debit, contact your bank.