SEPA Reports and R Messages

SEPA Reports

Daily reports should be made available to the Creditor by the Creditor’s bank. These are typically accessed through the Creditor Bank’s banking platform, directly via in-house software or passed by the a 3rd party (SEPA Bureau) in most cases.  The reports detail the Creditor’s daily SEPA Direct Debit transactions (including new mandates, collections, settlements and R-messages).

The name of such reports varies between Creditor banks. Some examples are the “Creditor Settlement Report” or “SEPA Direct Debit Payments Summary Report”.

R-messages

If any party cannot process the SEPA mandates and collections in the normal fashion, R-messages are sent to notify the Creditor. The actual notification will appear as an R-Transaction, often supplied in reports provided by the creditor bank. The various R-messages that occur are handled in a standard manner by all parties adhering to SEPA Direct Debit scheme rules.

Example R-messages and whether covered by the scheme:-

 

  1. In Scope

    Refusals, rejects, refunds, returns and reversals

  2. Out of Scope

    Revocations, requests for cancellation and refund compensation

Rejects & Returns

Rejects

These occur prior to inter-bank settlement (e.g. the Creditor & Debtor Banks).   Such payments are diverted and not executed.

Why could this occur?

  • For technical reasons identified by the Creditor, Debtor or CSM with regards to invalid file formats, bank info (BIC/IBAN, etc)
  • Debtor Bank is unable to execute the collection due to regulation (reasons set out in Article 78 of Payment Services Directive)
  • Debtor Bank is unable to execute the collection due to non-compliance (reasons in section 4.2 of the SDD Core Rulebook (e.g. similar to Bacs Direct Directs in the UK – in that the bank account could be closed or the account does not accept direct debits).
  • Debtor has made a Refusal Request directly to their Debtor Bank. The bank in turn generate a ‘Rejection’ of the collection being refused

Returns

The latest date for a settlement of a Return is five Inter-Bank Business Days* after the settlement Date of the collection.

*Interbank Bank Business Days (IBBD)

IBBD can differ to Business Banking Days. With IBBD being when the banks are typically open for bank to bank business.  To do this effectively across the European Union requires the use of TARGET2.  TARGET2 is an interbank payment system for the real-time processing of cross-border transfers throughout the European Union.  Its owned by the Eurosystem and runs to its own calendar, that has been caclculated long into the future in an effort to avoid operational disruption.

Refunds

Refunds are claims by the Debtor which must be made with their Debtor Bank before in the form of a ‘refund request’. Whether authorised or unauthorised. The service is only provided under the SEPA Core Direct Debit scheme.

What are ‘Guaranteed’ Refunds under the SEPA Core Direct Debit Scheme?

The Debtor is guaranteed a refund (the return of a collection) of an authorised Direct Debit if their request is made to their Debtor bank within 8 weeks of the disputed collection.

Who provides the refund under the SEPA Direct Debit scheme?

 

  1. The Debtor’s Bank

    regardless of whether Creditor has already provided the refund. The refund should only come from 1 party – why? To help avoid double refunds and confusion within payment cycle between participants. The Debtor bank is only concerned with its agreement with its customer (the Debtor) and obligations under the scheme. With that said, its recommended that the Creditor allows the Debtor bank to always be the refunding party with regards to a SEPA Direct Debit.

  2. Guaranteed Refunds (Refund Right)

    The Debtor’s Refund Right have an 8 week time limit under the Core Scheme – from the date the collection took place. If the collection is deemed unauthorised, the Debtor Bank is obliged to immediately Refund the Debtor.

The rights of the Debtor are fully explained in a statement available from their Debtor bank.

Authorised and unauthorised collections

 

  1. Authorised

    the collection was authorised with a valid Mandate from the Debtor (paper or paperless sign-up).This can be requested within 8 weeks of the SEPA Direct Debit settlement date on a ‘no questions asked’ basis. The Refund is provided to the Debtor by the Debtor bank. Settlement of the Refund must occur at the latest, 2 working days before this deadline. This is very similar to the policies of commercial business.

  2. Unauthorised

    The Debtor is disputing giving their authority for the collection/ disputing the Mandate. This can be requested within 13 months of the settlement date. Settlement of the refund must occur no later than 30 calendar days plus four working days after this deadline.

  3. Refund or Return requests after the deadline

    Debtor banks are bound by the scheme rules and must not accept requests for refunds or returns received after the deadline. It is the responsibility of the Creditors bank to ensure Refunds and Returns presented after a scheme deadline are not processed by the them or the Clearing Service Mechanism (CSM) and, that the Debtor bank are informed of this.

  4. Returns

    Returns and rejects must all be cleared and settled with the same CSM used for the initial collection, unless otherwise agreed between Banks concerned. CSMs in turn must have the ability to process Refunds, Returns, and Rejects relating to the scheme.

Refusals

Refusals are initiated by a request from the Debtor to the Debtor Bank to not pay a collection. How the refusal is handled is pre-agreed between the Debtor and Debtor Bank. The Debtor may also request a block on future SEPA Direct Debit collections on the account. If ‘refusal’ takes place before settlement, this results in a ‘Rejection’ of the collection.  If after settlement, the Refusal becomes a ‘Refund’.

Reversals, Revocations & Requests for Cancellation

Reversals occur when a Creditor bank concludes that a SEPA Direct Debit should not have been processed. A Reversal may only be processed after settlement i.e. within the 5 Business Banking Days* after the Due Date of the original collection.

NOTE – the Creditor bank is not obliged to offer ‘reversal services’ to Creditors and in return, Creditors are not obliged to use such services if offered.   If the Creditor does use an available reversal service – both Creditor and Debtor bank must act on it. The Creditor Bank can also raise such a request. Debtor banks are not required to perform checks on ‘Reversals’.

 

  1. About Revocations

    Revocations are requests by the Creditor to recall the instruction to collect until a date agreed with the Creditor Bank. Part of the underlying business agreement between the Creditor and Creditor Bank and as such not covered by the SEPA Direct Debit scheme.

  2. About Requests for Cancellation

    Requests for Cancellation are requests made by the Creditor Bank to recall the instruction to collect. This must take place prior to settlement. This is typically part of underlying business agreements between participants and as such not covered by the SEPA Direct Debit scheme.