SEPA Direct Debit

On account of the differences in the legal frameworks and the various domestic direct debit procedures which exist, the EPC decided at an early stage to develop a completely new SEPA Direct Debit Scheme (SDD). However, implementation of this scheme was only possible once a common framework had been developed within the European Union. Payment service providers were permitted to offer SEPA direct debits starting in November 2009 once the Payment Services Directive had been transposed to their country's national laws. The Eurosystem regularly calculates the level of SEPA direct debit usage in the entire euro area as well as in the individual SEPA-participating countries using SEPA indicators (2009/2010/2011 (only in German))

Two different direct debit procedures are available: a "Core Direct Debit" and a procedure designed solely for business customer transactions ("Business to Business Direct Debit" (B2B)). The core direct debit contains numerous elements recognisable from the German collection authorisation procedure. The B2B direct debit considers the needs of business customers and is similar to today's debit authorisation procedure.

SEPA Core Direct Debit

In accordance with the SEPA Core Direct Debit Scheme Rulebook, first-time direct debits have to be submitted to the paying agent five days before their due date. Any subsequent payments must be submitted two days before their due date. The lead time for one-off direct debits is also five days. A SEPA core direct debit can be returned within eight weeks after the account has been debited, with the debited amount re-credited. For a non-authorised payment, ie collection without a valid SEPA mandate, the payer can demand a refund of the debited amount within 13 months after the debit.

SEPA Business to Business Direct Debit

One-off, first-time or subsequent direct debits must be submitted to the paying agent one day before the due date in accordance with the SEPA Business to Business Direct Debits Scheme Rulebook. It is not possible to return business-to-business direct debits, as the debtor's bank (paying agent) is required to check the mandate information for conformity with the presented payment order before the debit is made.

SEPA mandate

The legal basis for the collection of SEPA Direct Debits is provided by SEPA mandates. This covers both the approval by the payer to effect the payment by SEPA direct debit to the payee, as well as the mandate to the payer's payment service provider for the purpose of encashment and account debit. Sample forms for the SEPA mandates (SEPA Core Direct Debit Mandate and SEPA Business to Business Direct Debit Mandate) are available from the German Banking Industry Committee (GBIC).

In June 2010, the Federal Court of Justice harmonised the legal rulings relating to the German direct debit scheme in cases of insolvency and outlined a way forward for the collection authorisation to be transformed into a (pre-)authorised payment. This would enable the banking industry to allow a collection authorisation to be treated as a SEPA Core direct debit mandate by amending their General Terms and Conditions. The amendments to the general terms and conditions of banks and savings banks as of 9 July 2012 apply not just to collection authorisations granted in the past but also to those issued after the introduction of the aforementioned amendments. It should be noted that the creditor will be obliged to inform the payer in writing of the changeover from collection via collection authorisation to collection on the basis of a SEPA Core direct debit prior to execution of the first SEPA Core direct debit, taking care to specify the creditor identifier and the mandate reference.

For more detailed information on the amendment of the terms and conditions and the opportunity to use a collection authorisation as a SEPA mandate, please refer to the internet page entitled "The German Banking Industry Committee".

The "Regulation No 260/2012 establishing technical and business requirements for credit transfers and direct debits in Euros (SEPA Regulation)" provides for the regulation of mandate migration. However, this will only hold water in cases where no corresponding national regulations or other customer agreements exist. The latter are already envisaged in Germany in the form of the amendments to institutions’ general terms and conditions described above. The Regulation complements these amendments and ensures that legal certainty shall prevail in cases where such amendments prove ineffective (eg where a customer lodges an official objection to those amendments). The Regulation has entered into force 31.03.2012.

The aforementioned amendments to the general terms and conditions do not apply to pre-authorised direct debit orders issued under the debit authorisation procedure. That means new mandates have to be arranged between the payer and payee either via the use of SEPA Core Direct Debit Mandate or SEPA Business to Business Direct Debit Mandate. The respective SEPA mandate must be obtained from the payer.

Comparison of SEPA Direct Debits Scheme and the German direct debit scheme
SEPA Core Direct DebitGerman direct debit scheme
Use within SEPADomestic use only
Mandate information is supplied in the data record when a direct debit is collectedMere reference to the collection authorisation when a direct debit is collected
Mandate expires after 36 months of inactivityCollection authorisation valid until revoked
Specification of a due date
Fixed lead times:
- First-time and one-off direct debits:
Due Date - 5 days
- Recurring direct debits:
Due Date - 2 days
Due upon presentation
Use of creditor identifier and mandate reference necessaryNo equivalent element
IBAN und BIC must be usedAccount number and bank sort code must be used

What can I do if an enterprise refuses to collect a SEPA direct debit to an account in another EU member state?

Pursuant to Article 9 (2) of Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro (SEPA Regulation), a payee using a direct debit to collect receivables shall not specify the member state in which that payment account is to be located, provided that the payment account is reachable under the SEPA Direct Debit procedure.

However, some enterprises which allow their customers to pay by direct debit have limited this option to current accounts held with a domestic credit institution. The Bundesbank has already received complaints from consumers about this practice. It is pursuing these complaints to the best of its abilities but is not a competent authority. Consumers who wish to complain about a company infringing Article 9 of the SEPA Regulation can turn to one of the qualified entities pursuant to section 4 of the German Injunctions Act (Unterlassungsklagengesetz – UKlaG). For more information and a link to the up-to-date list of these institutions, please visit the website of the Federal Financial Supervisory Authority (BaFin).

Above and beyond that, of course, all parties are permitted to take legal action.