SEPA Direct Debit Scheme
Since November 2009, businesses and consumers can benefit from the SEPA Direct Debit (SDD) Scheme. The standardization of payment services under SEPA and the uniform legal framework established by the Payment Services Directive allows customers to make domestic and cross-border debit transactions in euro in all SEPA member countries. Under the SDD Scheme, customers can make direct debits not just at the national level but throughout the Single Euro Payments Area.
From August 2014, SDD fully replaced all existing national direct debit schemes in the euro area. As in the case of the SEPA credit transfer (SCT), the IBAN (International Bank Account Number) and the BIC (Business Identifier Code) need to be provided for the SDD rather than the national account number and the national bank identifier code, as is currently the standard in Austria.
The legitimation for a SEPA direct debit is the mandate, the expression of consent and authorization given by the debtor to the creditor to allow the creditor to initiate collections for debiting the debtor’s account. The mandate also allows the debtor bank to directly debit the debtor’s account.
Currently, banks offer two different types of SDDs: First, there are SEPA Core Direct Debits; second, there are SEPA Business-to-Business (B2B) Direct Debits.
SEPA Core Direct Debit Scheme
SEPA Core Direct Debits are similar to Austrian preauthorized transfers.
The switch from such a conventional direct debit scheme to the SDD Core Scheme involves no costs or efforts for payers. On the contrary, with SEPA, consumers’ rights in connection with direct debits in euro area countries will be strengthened. Payment service providers must enable their customers to limit the amounts of debits on their accounts or to limit direct debits to specified payees.
The biller must make some changes when switching to the new procedure. For instance, prior to issuing the first SEPA direct debit, the biller must obtain a creditor identifier from its bank. In Austria, the creditor identifier is issued by the Oesterreichische Nationalbank. Moreover, the biller must inform payers of the switch to the SEPA Direct Debit Scheme and must provide his creditor identifier and his mandate reference to payers. Moreover, the biller must observe prenotification requirements, i.e must notify payers within a specified time limit of the due date and the amount of collection.
The payer may receive a refund for an authorized SEPA core direct debit, for which the prerequisite is a valid mandate, up to 56 days after the date on which the debit was executed; in effect, the debit is reversed. If the request for a refund concerns an unauthorized transaction – a transaction performed without a valid mandate – the period within which the reversal may be made is 13 months. The Austrian Payment Services Act defines this period.
SEPA Direct Debit Business-to-Business Scheme
The SEPA Direct Debit Business-to-Business Scheme – SDD B2B Scheme – applies exclusively to direct debits across SEPA by business customers (on the creditor and debtor side). This scheme functions quite similarly to the SEPA Core Direct Debit Scheme. The differences between the two schemes lie in the shorter timelines for presenting direct debits and the absence of a refund right for a direct debit, as the payer’s bank is obliged to ensure that the collection is authorized by checking the collection against mandate information. If a transaction is unauthorized, i.e. is executed without a valid mandate, the direct debit may be reversed within a period of 13 months, as in the case of the SDD Core Scheme.