How direct debit works

Direct debit transactions have changed since the introduction of SEPA. It now applies uniformly for the European payment traffic. The following article explains how the direct debit procedure has since been used in practice and how direct debits are revoked and payments refunded.

In this article you will find

  • The SEPA Direct Debit Scheme
  • What types of direct debit exist in practice?
  • Expiry of the direct debit procedure
  • How to revoke a payment order?
  • Is the consumer entitled to a refund?
  • If the account is not covered

The SEPA Direct Debit Scheme

Since the 9.7.2012 there is SEPA Direct Debit Scheme. This has achieved the goal of standardizing European payment transactions. SEPA (Single Euro Payments Area) stands for a uniform, European payment traffic area. The aim is to eliminate differences in the processing of euro payments and domestic payments. This direct debit procedure can be used throughout the EU payment area.

Since 1.2.2014, the specification of the IBAN and the BIC number Mandatory for SEPA direct debits and credit transfers. From the 1.2.In 2016, the IBAN number is usually sufficient. The IBAN number (International Bank Account Number) is a standardized international bank/account number. The BIC (Bank Indentifier Code) is an international bank code.

The Second Payment Services Directive of 25.11.In 2015, a German law of 17.7.Transposed into German law in 2017. The regulations concerning the direct debit procedure have been in force since 13.1.2018. In the German Civil Code, the regulations on payment services are found in §§ 675 c to 676c.

What types of direct debit exist in practice?

In practice, the direct debit procedure is applied in different ways:

Payment by card and signature
If you pay in a store with a debit card (Girocard) – formerly EC card – and instead of entering a PIN number you have to sign, it is a debit authorization. On the back of the receipt it usually says: "SEPA direct debit mandate: I authorize the company named overleaf to collect the amount from the named account by direct debit, instruct my credit institution to honor this direct debit and undertake to ensure the necessary account coverage." In addition, on the receipt z.B. the note: "The debit will be made the day after the next bank business day."

Direct debit authorization in contracts
In the case of long-term contracts where the customer has to make cash payments to the contractual partner at regular intervals, payment by direct debit is usually agreed upon. These are, for example, contracts with the mobile communications provider, with the electricity supplier and insurance contracts. The customer then grants the contractual partner a direct debit mandate upon conclusion of the contract, in which he declares his consent to the company making debits from his account using a specific mandate and a creditor identifier. At the same time, the customer instructs his own bank to honor the direct debit. The declaration that the customer signs has z.B. the following content: "I authorize Muster GmbH to collect payments from my account by direct debit. At the same time, I instruct my credit institution to honor the direct debits drawn on my account by Muster GmbH. Note: I can request a refund of the debited amount within eight weeks, starting from the debit date. The terms and conditions agreed with my bank apply."

Payment by direct debit for contracts concluded on the Internet
When ordering online, if the customer chooses to pay by direct debit, he must provide his bank details and authorize the company to debit the invoice amount from his account. At the same time, the payer also instructs his or her bank to honor the direct debit from his or her account.

Procedure of the direct debit

In contrast to a bank transfer, the procedure is not initiated by the consumer, but by his contractual partner, the entrepreneur. The payer submits a direct debit for a specific amount to his bank, specifying the consumer’s bank account information. The entrepreneur’s bank now contacts the consumer’s bank and makes a debit entry on the consumer’s account.

In terms of type, the SEPA direct debit distinguishes between two variants, namely the "basic variant" for consumers and the corporate direct debit between entrepreneurs. Only the basic variant between entrepreneur and consumer will be discussed in more detail here.

The consumer (debtor) issues a "Mandate". With this mandate, he authorizes the payee to collect the amount from the debtor’s account and at the same time instructs his payment institution (debtor’s bank) to honor the direct debit.

Each SEPA direct debit mandate is given a unique mandate reference. The payee must indicate it for each direct debit. It is mentioned on the account statements. In this way, the payer can track each direct debit from his account and compare it with the direct debit mandates issued. The creditor identification number of the payee and the purpose of the direct debit are also helpful.

The payee is obliged to notify the payer of the amount and the time of the debit at least 14 days in advance. Shorter deadlines are possible if these have been agreed in the terms and conditions or the invoice. Even in online banking, the payer is informed in advance of the specific due date. This gives you the opportunity to ensure that your account is sufficiently covered.

The consumer may withdraw a direct debit mandate at any time by notifying the payee and/or the payee’s bank.

The following diagram illustrates the direct debit process and depicts the parties involved. What used to be called a direct debit authorization is now called a direct debit mandate.

How to revoke a payment order?

According to § 675 p (2) sentence.2 BGB, the payer (that is, the bank customer) can revoke the payment order up to the end of the business day before the agreed due date. Was it therefore agreed that the direct debit would be made on 1.If the direct debit is collected during the first day of the month, it can still be cancelled on the last business day of the previous month. The revocation must be declared to the bank. If the direct debit was not revoked in time and the payment transaction has already been carried out, the payer has in many cases a claim for reimbursement against the bank.

Is the consumer entitled to a refund?

The payer has a claim against his bank for reimbursement of a debited payment amount, § 675 x paragraph 2 of the German Civil Code (BGB). He does not have to give reasons when asking for this refund. There is a time limit of eight weeks from the date of the account debit for the refund claim, § 675 x paragraph 4 BGB. In online banking and at the latest on the account statement, the customer can recognize the debit of his account.

However, if it is a so-called. "unauthorized" debit, d.h. a direct debit that is unauthorized, for example, because there is already no proper mandate, then the refund claim can be made in the period up to 13 months be asserted after the payment amount has been debited, Section 676 b Paragraph 2 Sentence 1 BGB. However, this period only starts to run if the bank has informed the customer of the corresponding payment transaction in accordance with the statutory provisions, section 676 b (2) sentence 2 of the German Civil Code (BGB).

When the account is not covered

A bank will only execute a direct debit if its customer’s account has the required cover (or. a correspondingly high overdraft facility exists). However, it happens again and again that this is not the case, for example because many debits are made at the end of the month and the employer has transferred the salary too late. In this case the direct debit will not be executed. The consumer’s bank then informs the trader’s bank that it was not possible to execute the direct debit due to insufficient funds. In this case, the question arises as to whether the consumer’s bank can claim the resulting expense (notification of the entrepreneur’s bank and notification of its own customer) from its customer in the form of a fee.

  • Charges for non-execution of a direct debit
  • Phishing

On this website, the Free State of Bavaria provides independent, science-based information on consumer protection.
Unfortunately, we are not able to offer individual legal information or personal advice. Also, we are not allowed to warn companies that behave in an anti-competitive manner ourselves.
If you still have any questions regarding your specific situation, please contact the contact points listed under Service .

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