Certain deadlines and processes need to be followed when using SEPA Direct Debit payments. In this article, you will learn what SEPA Direct Debit payments are and how they work, as well as which time processes and deadlines need to be followed for SEPA Core Direct Debit payments and standard SEPA Direct Debit payments. Plus, we'll also explain when a SEPA Direct Debit payment will be collected.

What's in this article?

• What is a SEPA Direct Debit payment?
  
• How do SEPA Direct Debit payments work?
  
• Which time processes need to be adhered to for SEPA Direct Debit payments?
  
• When are SEPA Direct Debit payments collected?
  

What is a SEPA Direct Debit payment?

SEPA Direct Debit payments are a reliable and secure payment process that offers benefits to both businesses and customers. SEPA Direct Debit is not a type of instant payment, but it allows businesses to receive deposits from customers in a short period of time and settle their expenses in a simple way. The same applies whether you're dealing with a SEPA Core Direct Debit (business-to-consumer) or a SEPA Direct Debit for business (business-to-business). We'll explain how the timelines differ for each type below.

How do SEPA Direct Debit payments work?

The first step is to register with SEPA. This can either be done directly with your bank or online via a special portal. The next step is for the business to receive written SEPA Direct Debit authorisation from the customer. This needs to contain detailed information about the customer, the bank account that the SEPA Direct Debit will be taken from and the amount to be debited. The customer also needs to give their consent.

As soon as the customer has given their consent, the business can initiate the SEPA Direct Debit. The business then needs to fill in and sign the appropriate forms, including all of the relevant data from the SEPA Direct Debit authorisation, and send this to the bank or payment provider. The payment provider checks the SEPA Direct Debit authorisation and sends it to the customer's bank. The customer's bank checks the request and either confirms or rejects it. If the request is confirmed, the bank will credit the amount to the company's bank account, usually within two working days of receiving the authorisation.

Leaving the details to a payment provider lets you focus on your core business instead. With Stripe, for example, you can accept SEPA Direct Debit payments easily.

Which time processes need to be adhered to for SEPA Direct Debit payments?

Time periods for SEPA Core Direct Debit payments: First, you will need a SEPA Direct Debit mandate. Once you have this, you need to inform your customer two weeks before collecting the SEPA Direct Debit, unless you have agreed on a shorter time period. This is referred to as a "transmission of payment order". The direct debit may not be withdrawn in advance of two banking days after notification. Your deadline for issuing a one-off or first-time order to your bank is five days prior to collecting the SEPA Direct Debit. Two days is enough for recurring or final debit orders. If the customer's bank has to return a collection, this can only be done for a maximum of five working days following the collection.

The person paying has the right to request a refund of an authorised collection from their bank within eight weeks of the SEPA Direct Debit. For unauthorised or fraudulent collections, this period is extended up to 13 months after the debit was taken. On the other hand, as a business, you have eight weeks to collect the money again. Collections are no longer possible after this period has expired.

Time periods for SEPA Direct Debit payments for business: Two weeks' notice needs to be given prior to taking a SEPA Direct Debit for business. However, one working day before the collection is your deadline to send a debit order, and businesses are able to correct the collection up to two days after the debit has been taken.

The person paying is not entitled to claim a refund for an authorised collection if it was a SEPA Direct Debit for business. In the case of unauthorised or fraudulent collections, the person paying can request a refund up to 13 months after the debit was taken.

The following applies to both types of SEPA Direct Debit payments: If a payment fails before billing, your bank will be informed on the day it is due. If there are problems after billing has occurred, the customer's bank will inform your bank on the day that the issue arises, or a maximum of five days after billing. Refunds for SEPA Core Direct Debit payments need to be settled within five interbank working days after their due date. For SEPA Direct Debit payments for business, this period is shortened to two interbank working days. Interbank working days refer to days that businesses are open for interbank transactions.

When are SEPA Direct Debit payments collected?

SEPA Direct Debit payments are debited for the day they are due. This usually happens at around 19:30 on the working day before they are due, but they are listed under the date of the next working day. A SEPA Direct Debit for business will be credited to your bank account after around two working days, or three working days for a SEPA Core Direct Debit.