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SEPA Direct Debit: a complete guide for businesses and individuals

SEPA Direct Debit has become essential for simplifying and securing financial transactions in France and, more broadly, across the Eurozone. Whether used for paying recurring bills or automating debt collection, this payment method offers unprecedented flexibility and reliability.

SEPA Direct Debit facilitates financial management for businesses and individuals by significantly simplifying cross-border payments. Its widespread adoption promotes economic integration and enhances the security of banking transactions in Europe.

Xpollens provides you with everything you need to know about SEPA Direct Debit, from its definition to its practical application in your daily operations.

What is SEPA Direct Debit?

Definition

SEPA Direct Debit is a banking payment method used to transfer funds directly from one account to another within SEPA (Single Euro Payments Area) member countries.

It allows a creditor to request their payment service provider (their bank) to debit the account of a payer (the debtor).

To do so, the creditor must obtain prior authorization from the debtor in the form of a direct debit mandate.

An SDD (SEPA Direct Debit) mandate is ideal for recurring payments, such as bills or subscriptions, as there is no limit to the transaction amount.

Scope of application

This system is valid in 36 SEPA countries, including the 27 European Union member states: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.

It also applies to the principalities of Andorra and Monaco, Switzerland, San Marino, Vatican City, and the United Kingdom.

Additionally, the SEPA system covers the three members of the European Economic Area (EEA): Iceland, Liechtenstein, and Norway.

In all these countries, euro-denominated payments must be processed under the SEPA Direct Debit system.

How does a SEPA Direct Debit mandate work?

SEPA Direct Debit comes in two main variants: SDD Core and SDD B2B. While the creditor is responsible for ensuring the proper operation of the mandate in both cases, these two types of direct debit differ significantly:

  • SDD Core: Used by all types of debtors (individuals, customers, businesses, or public entities). It is mandatory for all banks within the SEPA zone that offer euro-denominated direct debits.
  • SDD B2B: A specific direct debit type for business-to-business transactions. Since it is optional, not all banks offer this type of direct debit. Its particularity lies in the fact that authorised debits cannot be refunded.

Direct debit mandates can be issued as a one-off payment (when the debtor’s authorisation covers a single transaction) or recurring (a series of payments).

A recurring SEPA Direct Debit mandate continues until the debtor revokes their authorisation. However, if no SEPA direct debit order is submitted for 36 months, the mandate becomes invalid and can no longer be used.

To modify a SEPA Direct Debit, simply contact your creditor and provide the updated information, such as a change in bank account or IBAN, ensuring that the mandate is duly updated.

What are the advantages of SEPA Direct Debit?

Valued for its security and practicality, SEPA Direct Debit offers a wide range of benefits for businesses and individuals. These include:

  • A secure payment method
  • Automation of debt collection
  • Convenience for businesses
  • Uniformity across the SEPA zone
  • Reduced transaction costs
  • Flexibility for debtors

In summary, SEPA Direct Debit is a secure, practical, and cost-effective payment method, perfectly suited to the modern needs of businesses and individuals in the Eurozone.

How to set up a SEPA Direct Debit mandate

Setting up a SEPA Direct Debit mandate is a crucial step in automating your recurring or one-off payments. The process varies depending on the type of SEPA Direct Debit chosen, SDD Core or SDD B2B, but specific formalities must always be observed.

Formalities and mandatory details

To be valid, a SEPA Direct Debit mandate must include several elements:

  • The title “SEPA Direct Debit Mandate”
  • The Unique Mandate Reference (UMR) to identify each SEPA mandate
  • The creditor’s details: name, address, and commercial or legal designation
  • The SEPA Creditor Identifier (SCI)
  • The debtor’s identity and IBAN
  • A clause authorising the direct debit
  • The mandate type (SDD Core or SDD B2B) and the payment type (one-off or recurring)
  • The debtor’s dated signature

The mandate must be written in the debtor’s language, or in English if the creditor cannot determine the language.

Steps to set up a SEPA Direct Debit mandate

The process for setting up a SEPA Direct Debit mandate, whether for SDD Core or SDD B2B, follows a structured procedure with slight variations depending on the type of mandate:

  • Transmission of the SEPA Direct Debit mandate: The creditor sends a mandate form containing the mandatory details listed above to the debtor. For SDD B2B, these details must be completed and validated by the debtor’s bank or client, as applicable.
  • Debtor’s signature: The debtor adds their banking details, including their IBAN, and signs the document. One copy is signed for an SDD Core mandate, while two copies are required for an SDD B2B mandate (one for the creditor, the other for the debtor’s bank).
  • Return of the Mandate to the Creditor: The debtor returns the signed mandate to the creditor, and for SDD B2B mandates, also sends a copy to their bank.
  • Advance Notification: Before initiating a direct debit, the creditor must notify the debtor at least 14 days in advance, unless otherwise agreed. This notification must include the debit date, amount, UMR, and the SEPA Creditor Identifier (SCI).
  • Initiation of the Direct Debit: The creditor sends the direct debit order to their bank, which transmits it to the debtor’s bank through clearing and settlement mechanisms (CSM). On the agreed date, the debtor’s account is debited, and the funds are credited to the creditor’s account.

Xpollens ensures full compliance with SEPA Direct Debit mandate requirements by handling the entire process, from creation to execution.

Their solution ensures that every legal and regulatory aspect is met without compromise, reducing the risk of errors and non-compliance.

Trusting Xpollens for your SEPA Direct Debit setup guarantees a secure and professional solution to simplify your financial operations while adhering to the strict regulatory framework.

How to revoke a SEPA Direct Debit mandate?

Revoking a SEPA Direct Debit mandate means cancelling it so that the bank transaction does not occur. Consequently, the creditor will no longer have the authorisation to debit funds. It is essential to differentiate between revoking a complete mandate and cancelling a single direct debit.

Revocation of a complete mandate

Revoking a SEPA Direct Debit mandate permanently terminates the authorisation granted to the creditor to debit funds from the account.

To proceed, the debtor must contact the creditor directly (preferably by registered letter with acknowledgement of receipt), specifying the Unique Mandate Reference (UMR) to be revoked.

It is also advisable to notify the bank about the revocation to prevent any future debits linked to the mandate. This procedure terminates all future debits associated with the mandate.

Revocation of a Single Direct Debit

Revoking a specific direct debit, also referred to as a one-off cancellation, allows for the cancellation of a single transaction without revoking the entire mandate.

In this case, the debtor must contact their bank, either by letter or by visiting a branch. Additionally, it is recommended to notify the creditor, preferably by registered letter with acknowledgement of receipt.

For example, if the debtor has already paid the amount by another method, they can request the bank not to execute a specific direct debit, provided the request is made before the due date of the debit.

Banks may charge revocation fees as per the terms outlined in the payment service contract or account agreement.

How to Block or Dispute a SEPA Direct Debit Already Debited from Your Account

If you wish to block or dispute a SEPA Direct Debit that has already been debited from your account, you first need to determine whether the debit was authorised.

Disputing an authorised SEPA Direct Debit

A SEPA Direct Debit is considered “authorised” when a direct debit mandate has been signed beforehand between a creditor and a debtor.

The debtor (payer) can dispute an authorised SEPA Direct Debit within 8 weeks from the debit date. For instance, this could apply if the debited amount was incorrect.

Note: Businesses cannot dispute an authorised SEPA B2B Direct Debit.

For disputes regarding an authorised SEPA Core Direct Debit, the debtor’s bank has 10 working days to refund the debited amount after receiving the refund request.

It is important to note that a bank refund does not necessarily mean that the debt is no longer valid. If you owe a debt to the creditor, you are still required to settle it using another payment method. It is your responsibility to resolve the dispute directly with the creditor.

Disputing an unauthorised SEPA Direct Debit

A SEPA Direct Debit is considered “unauthorised” if no direct debit mandate was signed.

If a SEPA Direct Debit has been executed without authorisation, the debtor can dispute the transaction within 13 months of the debit date.

Note: This timeframe is reduced to 70 days if the beneficiary’s bank is located in a non-EU or non-EEA member state.

In such cases, the bank must refund the funds no later than the end of the next working day after receiving the request. If any bank fees or overdraft charges have been applied due to this transaction, they must also be reimbursed.

In the event of a SEPA Direct Debit dispute, Xpollens ensures a smooth and compliant management process to minimise the risk of disputes.

By automating recurring payments, Xpollens simplifies operations and significantly reduces the likelihood of errors. Their expertise allows you to offer your clients a secure and efficient online payment experience while focusing on growing your business.

Xpollens is likely your best ally for managing SEPA Direct Debits, especially for online payments, which are critical in B2B transactions. Their solution also enables the issuance of bank cards and payment solutions for your clients. Whether it’s a virtual or physical card, Xpollens supports you in creating a seamless and effective payment experience.

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