Understanding Sepa Direct Debit: What You Need to Know and How to Use It

Over the course of a month, there are usually a few recurring bills – for example for electricity, insurance, rent or a loan. You can quickly lose track and miss one or two due dates. Sepa direct debit can help. In this article you will find out what Sepa direct debit is all about and what you need to pay attention to when using a Sepa direct debit mandate.

What is a Sepa direct debit?

The Sepa direct debit procedure (Sepa = Single Euro Payments Area) is a Europe-wide payment system. It is not the “debtor” who transfers the amount of money due to the “creditor”, but rather the payee who collects money from the payer’s checking account.

It doesn’t just happen like that. The payer must allow the payee to make regular debits of a fixed amount. This permission is also called Sepa direct debit mandate. It runs indefinitely, but you can revoke it at any time.

Requirements for a Sepa direct debit

In principle, anyone can use Sepa direct debit. It is most often used in online trading or in various contracts – for example cell phone contracts or insurance.

However, there are a few requirements for a Sepa direct debit mandate to be valid and for the contractual partner to be allowed to collect amounts due from your account. Specifically, a Sepa direct debit mandate must contain the following information:

Your bank details. Including your name, the name of your bank and your Iban.

The recipient’s details. You will usually receive a form from the payee. On it you will find, among other things

• the name of the payee
• the creditor ID (= Credit Identifier, short: CI – only the recipient can apply for this number from the German Bundesbank)
• the mandate reference number
• the name of the recipient’s bank

You must date this mandate, sign it (or electronically sign it) and send it back to the payee. This allows the payment recipient to set up a standing order at the bank.

These Sepa direct debit procedures exist

There are two types of Sepa direct debits: Sepa basic direct debits and Sepa company direct debits.

Die SEPA basic direct debit Private individuals and consumers can use it to make payments to a company – for example to the electricity provider or the property management company. Banks are obliged to offer Sepa core direct debit as a payment method.

At the Sepa company direct debit it’s about payments between two companies. Private individuals or small businesses are excluded. However, banks do not have to offer this type of direct debit as a payment method.

A Sepa direct debit mandate can either be a piece of paper with a signature or you can sign the mandate electronically. Since the Sepa direct debit mandate is only valid with a signed signature, consumers usually find it easy to object to the payment recipient’s Sepa direct debit when making online payments. As a rule, nothing is signed there.

Note: The objection is only valid if money has been debited unlawfully – this is the case, for example, if you have long ago canceled a contract but the payee is still collecting the money.

Advantages and disadvantages of Sepa direct debit

There are various advantages and disadvantages with Sepa direct debit. To the advantages belong:

• punctuality. You no longer have to worry about forgetting bills or missing due dates. This is also an advantage for companies that regularly receive money from their customers.
• Convenience. With Sepa direct debit, payment is made completely automatically. You don’t have to do anything about it anymore.
• uniformity. The Sepa direct debit is uniform throughout Europe.
• Chargeback. With Sepa core direct debit, customers can have debited amounts returned without giving the bank reasons. For example, if money was unlawfully debited from you; For example, if you ordered a product but never received it.
• contradiction. For online payments without a signed Sepa direct debit mandate, you can easily object to the payment recipient in the event of unlawful debits.

However, there are also a few Disadvantages:

• Risk. Companies and retailers have no security when it comes to online contracts. Finally, Sepa basic direct debit procedures are usually carried out without a secure signature (in paper form).
• Termination. You can’t simply cancel the Sepa direct debit mandate at your bank, you have to contact the relevant retailer.
• Chargeback. With Sepa company direct debit, a chargeback is usually only possible if you never gave the mandate in the first place. Otherwise your money will end up with the payee.

Refund Sepa direct debit: This is how it works

With Sepa basic direct debit, you have the option of having your money refunded unconditionally and without giving reasons – but only within eight weeks of the money being debited. To do this you need to contact your bank. You can only completely cancel the Sepa direct debit with the recipient themselves.

For example, if you no longer want to use a streaming provider to whom you have given the Sepa direct debit mandate, you must contact them, cancel the subscription and withdraw the mandate.

Note: If money has been deducted from your account without authorization via Sepa direct debit, you have up to 13 months to get your money back. However, it is best to check your account transactions at least once a month so that you can always react quickly to possible inconsistencies.