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, how they work, and which time processes and deadlined 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 to 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 for each differ 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 authorization 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 authorization, and send this to the bank or payment provider. The payment provider checks the SEPA Direct Debit authorization 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 authorization.

You can also leave the details to a payment provider so that you can focus on core business and easily accept SEPA Direct Debit payments using Stripe.

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 D, 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 before 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 business days after collection.

The person paying has the right to request a refund of an authorized collection from their bank within eight weeks of the SEPA Direct Debit. For unauthorized 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 business 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 authorized collection if it was a SEPA Direct Debit for business. In the case of unauthorized 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, the customer’s bank will inform your bank on the day that the problem occurs, or a maximum of five days after billing. Refunds for SEPA Core Direct Debit payments need to be settled within five interbank business days after their due date. For SEPA Direct Debit payments for business, this period is shortened to two interbank business days. Interbank business 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, usually around 19:30 p.m. on the business day before they are due, but listed under the date of the next business day. A SEPA Direct Debit for business will be credited to your bank account after around two business days, or three working days for a SEPA Core Direct Debit.