SHORTCUT TO SEPA Direct Debit (SDD)

Launched in November 2009, the SEPA Direct

Debit Core Scheme (SDD Core) and the SEPA

Direct Debit Business to Business Scheme (SDD

B2B) create for the first time a payment instrument

that can be used for both domestic and cross-

border collections throughout SEPA. SEPA stands

for Single Euro Payments Area. The SEPA payment

schemes are developed by the European Payments

Council (EPC), the decision-making and coordination

body of the European banking industry in relation to

payments.

The SEPA Schemes dene sets of rules

and standards for the execution of SEPA

payment transactions that have to be

observed by payment service providers

(PSPs). The SEPA Schemes are set out in the

SEPA Scheme Rulebooks approved by the

EPC. These Rulebooks can be regarded as

instruction manuals which ensure a common

understanding between PSPs on how to

move funds from account A to account B

within SEPA.

The particular SEPA payment products

and services oered to the customer

are developed by individual PSPs or

groups thereof operating in a competitive

environment. The SEPA Schemes provide

the exibility and options which enable PSPs

to add features and services of their choice

to the actual payment products.

SHORTCUT TO

SEPA Direct Debit (SDD)

TAKE PAYMENTS TO THE NEXT LEVEL

Updated Edition February 2014

European Payments Council (AISBL)

Cours Saint-Michel 30A

1040 Brussels, Belgium

Phone: + 32 2 733 35 33 / Fax: + 32 2 736 49 88

[email protected]

www.epc-cep.eu

This publication summarises the main

features of the SEPA Direct Debit Schemes

including their key benets. For a denitive

source of information regarding the rules and

obligations of the schemes, refer to the SDD

Scheme Rulebooks and the accompanying

Implementation Guidelines approved by the

EPC available for download on the EPC web

site at www.epc-cep.eu / SEPA Direct Debit.

The SDD Core Scheme – like any other direct debit

scheme – is based on the following concept: “I request

money from someone else, with their prior approval,

and credit it to myself”. The payer and the biller must

each hold an account with a payment service provider

(PSP) located in SEPA

. The accounts may be in euro

or in any other SEPA currency. The transfer of funds

(money) between the payer’s bank and the biller’s bank

always takes place in the euro currency.

The SDD Core Scheme allows a biller to collect funds

from a payer’s account provided that a signed mandate

has been granted by the payer to the biller. The payment

service providers executing the direct debit transaction

must formally participate in the SDD Scheme. The SDD

Scheme may be used for single (one-off) or recurrent

direct debit collections, the amounts are not limited.

Even exceeding the requirements of the Payment

Services Directive (PSD), the SDD Core Scheme grants

payers a “no-questions-asked” refund right during

the eight weeks following the debiting of a payer’s

account; e.g. during this time any funds collected by

SDD Core will be credited back to the payer’s account

upon request. In the event of unauthorised direct debit

collections, the payer’s right to a refund extends to 13

months as stipulated in the PSD.

Keeping in mind that the process of collecting a

payment by direct debit is initiated by the biller, the

biller (and, in consequence, the biller’s bank) must

respect the following timelines under the SDD Core

Scheme: the payer’s bank must receive the request

for a first direct debit collection or for a one-off direct

debit collection the latest five business days prior to the

due date. For subsequent direct debit collections, the

payer’s bank must receive such a request the latest two

business days prior to the due date.

The SDD B2B Scheme enables business customers

in the role of payers to make payments by direct debit.

The most important differences between the SDD Core

Scheme and the SDD B2B Scheme are:

Services and products based on the SDD B2B

Scheme are only available to businesses; the payer

must not be a private individual (consumer).

In the SDD B2B Scheme the payer (a business) is

not entitled to obtain a refund of an authorised

transaction.

The SDD B2B Scheme requires the payer’s bank to

ensure that the collection is authorised by checking

the collection against mandate information; the

payer’s bank and the payer are required to agree on

the verification to be performed for each SEPA B2B

direct debit.

Responding to the specific needs of the business

community the B2B Scheme offers a significantly

shorter timeline for presenting direct debits and a

reduced return period

The SDD B2B Scheme Rulebook includes the

option to provide signatures of several persons with

a SEPA mandate issued electronically. In the event of

an electronic mandate with multiple signatures being

issued, the SDD B2B Scheme extends the timeline

allowed for the payer’s bank to verify the authenticity of

such a mandate. This option responds to the fact that

in the business environment a payment often has to be

authorised by more than one person.

The SDD B2B Scheme fully supports the intra-

European supply chain management of companies

on the financial side and facilitates trade across the

internal market.

Main dierences between the

SDD Core Scheme and the SDD B2B Scheme:

General features of the

SEPA Direct Debit Schemes

SDD Core Scheme SDD B2B Scheme

The technical terms used in the SDD Scheme Rulebooks refer to the payer as “debtor” and to the biller as “creditor”.

For details on the SDD B2B Scheme time cycle refer to the SDD B2B Rulebook, chapter 4.3.

As mandated by EU Regulation (EC) 924/2009, every bank in the euro area must be reachable for cross-border

direct debits; and thus for the SDD Core Scheme, by 1 November 2010. It is optional for banks to offer services

based on the SDD B2B Scheme.

Collection of domestic and cross-border direct debits across SEPA

Ability to determine the exact date of collection

Payment completion within a pre-determined time cycle resulting in reliable cash flow

Straightforward reconciliation of payments received

Ability to automate exception handling (refunds, returns, rejects)

Simple and secure means of paying bills throughout SEPA

Easy reconciliation of debits on account statements

Payers avoid dealing with the consequences of late payments

Advantages for billers include:

Advantages for payers include:

Reachability

Benefits

Specific features of the

SEPA Direct Debit Schemes

IBAN (International Bank Account Number) and BIC

(Business Identifier Code) are the only permissible

account and bank identifiers for SEPA transactions.

Whereas until now they have been used only for

cross-border payments in most countries, with SEPA

this applies to domestic payments as well. The biller,

therefore, has to provide IBAN and BIC of the account

that should be debited to his bank

as set out in the

‘Regulation (EU) No 260/2012 establishing technical

and business requirements for credit transfers and

direct debits in euro and amending Regulation (EC) No

924/2009’.

A mandate is signed by the payer to authorise the

biller to collect a payment and to instruct the payer’s

bank to pay those collections. Payers are entitled

to instruct their banks not to accept any SEPA direct

debit collections on their accounts. The mandate can

be issued in paper form or electronically. The mandate

expires 36 months after the last initiated collection. The

signed mandate must be stored by the biller as long as

the mandate is valid but at least for 14 months after the

last collection.

IBAN and BIC Mandate

The term “bank” is used in a non-discriminatory fashion and does

not exclude payment service providers other than banks.

The biller must send a so called pre-notification, an

invoice for example, to the payer at least 14 calendar

days before collecting the payment, unless a different

time line has been agreed between the payer and the

biller. The pre-notification includes the due date and the

amount of the collection. The pre-notification may be

sent only once even for recurrent direct debit collections

if the due dates and the amounts of future collections

are stated. For example: a publisher (biller) may send

a single pre-notification annually to the newspaper

subscriber (payer) if this pre-notification states that the

amount of the monthly subscription fee will be collected

on the first day of each month.

Each biller in SEPA will be identified with a creditor

identifier. This identifier, in connection with the mandate

reference, allows the payer and the payer’s bank to

verify each SEPA direct debit and to process or reject

the direct debit according to the payer’s instructions.

Billers will have to request this identifier according to

local practice.

The SDD Schemes include the possibility to create

mandates through the use of electronic channels. The

e-mandate brings further advantages to payers: the

payer avoids the inconvenience of printing, signing and

mailing a paper form by using a fully electronic process.

The e-mandate facility is based on secure, widely used

online banking services of the payer’s bank and is an

optional service offered by payment service providers.

The ISO 20022 message standards (the SEPA data

formats) are binding between banks. Details on the

use of the ISO 20022 message standards by bank

customers are set out in the European Union (EU)

‘Regulation (EU) No 260/2012 establishing technical

and business requirements for credit transfers and

direct debits in euro and amending Regulation (EC) No

924/2009’.

The SDD Schemes allow payers and billers to

anticipate the precise date (due date), when their

account will be debited or credited, respectively. The

due date is assigned by the biller.

Pre-notification

Creditor IdentifierE-mandate

SEPA data format

Due date

Shortcut to SEPA Direct Debit. EPC document reference: EPC222-08 version 6.0

Reproduction for non-commercial purposes is authorised; with acknowledgement of the source.

Design by arnaudbeelen.be / Brussels

In February 2012, the European legislator adopted the ‘Regulation (EU) No 260/2012

establishing technical and business requirements for credit transfers and direct debits in euro

and amending Regulation (EC) No 924/2009’ (the SEPA Regulation), which defines 1 February

2014 as the deadline in the euro area for compliance with the core provisions of this Regulation.

In non euro countries, the deadline will be 31 October 2016. Effectively, this means that as of

these dates, existing national euro credit transfer and direct debit schemes will be replaced by

SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD). The majority of market participants

recognise the value of setting a deadline for migration to harmonised SEPA payment schemes

through European Union Regulation.

European Union Regulation defines

mandatory deadlines for migration to SEPA