European direct debits

What is a European direct debit?

The European direct debit (SEPA Direct Debit) is a payment method whereby an organization – the collector – can automatically collect amounts from the customer’s payments account with the customer’s consent. This can be a one-off or recurring payment. The customer first provides a written or digital authorization, which the collector records in its records.

The collector decides when to debit an amount from the customer and informs the customer in advance of the date and amount. The collection order is then forwarded via the collector’s bank to the customer’s bank and processed.

Consumers retain control: with the standard European direct debit, they can unconditionally reverse (reverse) an incorrect debit up to 8 weeks after the date. With business European direct debits (between companies), reversal is not possible.

Variants of the European direct debit

There are two variants within the SEPA area:

• Standard European direct debit (Core SDD)
  Suitable for consumers and businesses. After receiving a direct debit authorization from a customer, the collector can immediately start collecting payments automatically. The customer has an unconditional right of reversal for 8 weeks.
• Business European direct debit (B2B SDD)
  Only for direct debits between businesses and institutions. Reversals are not possible. An organization that issues a business direct debit authorization to a collector must first report this to its own bank. Only then can the collector collect business payments automatically from that organization.

Both variants are based on uniform SEPA standards, which means that the same rules apply in all 27 EU member states plus 14 other European countries, including Norway, Switzerland, the UK, and Iceland.

Rules for collectors

Collectors who use European direct debit must meet clear conditions to ensure the reliability and security of the process.

Conditions for use

• Sign a direct debit contract with your bank.
• Use MOI-compliant direct debit authorizations: on paper with a handwritten signature from the customer, via Digital Mandate Service from Dutch banks, or with a digitally completed PDF form that has been digitally signed by the customer using iDIN Signing from Dutch banks.
• Record authorizations completely and correctly and store them carefully.
• Always inform customers in advance of the date and amount of the debit (pre-notification).
• Take into account the 8-week right of reversal for standard European direct debits.

Reversals and MOI procedure

• Consumers can reverse (reverse the transaction, undo) a direct debit within 8 weeks without giving a reason.
• In the case of a direct debit without a valid authorization, customers can have the amount reversed up to 13 months after the debit date by submitting an Unjustified Direct Debit Notification (MOI). To prevent this, the collector must receive an MOI-proof direct debit authorization from each customer and record it correctly in their records.

Consumer protection measures

Banks offer their customers nine options for limiting or blocking direct debits. As a result, a collector may sometimes be unable to collect, even with an MOI-proof authorization. These are the most important options for consumers:

• block all direct debits indefinitely, from all collectors;
• block all direct debits from a specific collector indefinitely;
• refuse one specific, already announced direct debit in advance;
• block direct debits from a specific collector above a certain amount;
• limit the number of direct debits from a specific collector;

For collectors, this means that a smooth collection process depends on:

• collection processes that take into account possible reversals and blockages.
• carefully recording and complying with collection agreements with customers;
• providing timely and clear information to customers about each collection (pre-notification);
• providing timely and clear information to customers about changes in collection;