A subscription to bookkeeping software or the premium for a business insurance policy can be paid by SEPA direct debit: the supplier collects the amount itself, and the payer does not have to transfer anything. The other way round, a business owner can collect from customers who pay the same amount every month. On both sides the money follows a fixed schedule, with time limits that protect the payer and give the creditor clarity.
Below you can read how a SEPA direct debit works, how the Core and the business (B2B) direct debit differ and when you can have a debit refunded. After that come failed direct debits, stopping a direct debit and what you need to collect yourself.
In short:
- What is a SEPA direct debit? A payment started by the payee: with the customer’s permission an organisation, the creditor, automatically debits an amount from the customer’s payment account, once or on a recurring basis.
- The creditor announces the date and amount in advance, under the rules of the European Payments Council at the latest 14 calendar days before the collection date, unless payer and creditor have agreed otherwise.
- With the Core direct debit the payer can have a debit refunded within 8 weeks without giving a reason. Without a valid mandate, a time limit of 13 months applies.
- With the business (B2B) direct debit a refund is not possible, except for an unauthorised direct debit. The payer can only refuse the collection, up to and including the day of the debit.
What is a SEPA direct debit?
A SEPA direct debit, in Dutch SEPA-incasso, is a payment in which the payee takes the initiative. With a transfer the payer sends the money. With a direct debit the creditor requests the amount from the payer’s bank. Betaalvereniging Nederland describes the European direct debit as a payment method in which an organisation, with the customer’s permission, can automatically collect amounts from the customer’s payment account. That permission is called the mandate.
The SEPA direct debit works under one set of rules across the whole SEPA area, laid down by the European Payments Council. The creditor decides when an amount is debited, but informs the customer in advance of the date and the amount. The collection instruction then goes through the creditor’s bank to the customer’s bank, which processes the amount. What a mandate contains and how to give one is covered in our article on the SEPA mandate.
Creditor, payer and two banks
Every direct debit involves four parties. The creditor is the company or institution that receives the money; the payer is the customer who has given permission. According to the glossary of Betaalvereniging Nederland only a company or institution can collect by direct debit, and only after it has signed a direct debit contract with its own bank and the payer has given a mandate. That contract comes with a creditor identifier: one reference that points to exactly one creditor in every SEPA country. The creditor’s bank and the payer’s bank handle the rest.
Core or business direct debit
There are two kinds of SEPA direct debit. The standard European direct debit, Core in the EPC rules, is for consumers and businesses. Dutch banks also call it SEPA-incasso Algemeen, and the recurring variant SEPA-incasso Algemeen doorlopend. The business direct debit, Business-to-Business or B2B, is only meant for payers who are not consumers and is called SEPA-incasso Bedrijven by Dutch banks. The difference lies mainly in the payer’s rights:
| Feature | Core | Business (B2B) |
|---|---|---|
| For whom | Consumers and businesses | Only payers who are not consumers |
| Mandate | Held by the creditor | Also registered with the payer’s bank |
| Pre-notification | At the latest 14 calendar days before, unless agreed otherwise | At the latest 14 calendar days before, unless agreed otherwise |
| Refund without giving a reason | Within 8 weeks of the debit | Not possible |
| Refusal by the payer | Before the debit | Up to and including the day of the debit |
| Return by the payer’s bank | Up to 5 bank business days after settlement | Up to 3 bank business days after settlement |
For a business owner the kind matters on both sides. If you pay a supplier by direct debit, check which mandate it asks for: with a business mandate the refund right falls away, and a registration with your own bank comes with it. If you collect from other businesses yourself, you can use the business direct debit, provided the customer registers the mandate with its own bank.
One-off or recurring
Whatever the kind, every direct debit is either one-off or recurring. According to Betaalvereniging Nederland a one-off direct debit suits a service or product the customer wants to pay for afterwards. A recurring direct debit belongs to repeated periodic payments, such as a subscription or a fixed fee. The same submission deadline applies to both: under the current EPC rules the payer’s bank must receive the collection at the latest one bank business day before the collection date.
In summary: the Core direct debit gives the payer 8 weeks to claim a refund without a reason, the business direct debit does not. In return, a business mandate is first registered with the payer’s bank.
How does a SEPA direct debit work?
A direct debit follows a fixed timeline. The European Payments Council lays it down in the rules for the Core and the business direct debit, and the steps are the same for both:
For the creditor this means that a received direct debit is not yet final. Betaalvereniging Nederland points out that a bank can first credit a direct debit in advance and reverse that credit within 3 to 5 working days, for example when it later turns out that the payer cannot pay. The exact submission times differ from bank to bank. Under the EPC rules the creditor’s bank must tell its customer the cut-off time and the cycle in which collections have to be submitted.
Refunding a direct debit
Refunding a direct debit is called storneren in Dutch banking language, from the Italian stornare, to reverse. With the Core direct debit the payer can have any debit refunded up to 8 weeks, that is 56 days, after it was debited, without giving a reason. According to Betaalvereniging Nederland the bank always approves it. The right comes from the EU Payment Services Directive and is set out in the Dutch Civil Code: for eight weeks the payer has an unconditional right to ask for a refund.
A refund of a direct debit goes through your own bank. With the business direct debit it is not possible: there is no refund right. A company that pays by business direct debit can only refuse a debit it disagrees with in advance, up to and including the day the collection leaves the account. If a company pays by Core direct debit, it does have the 8-week period. After those 8 weeks a refund is no longer possible, except for an unauthorised direct debit.
Unauthorised direct debit
If the payer never gave a valid mandate, it is an unauthorised direct debit (onterechte incasso). The payer can report such a debit to its own bank up to 13 months after it was debited, with a Melding Onterechte Incasso (MOI). The 13-month period comes from the EU Payment Services Directive and is also in the Dutch Civil Code. For a business account, the bank and the customer may legally agree a different period. For creditors the MOI is the reason to record mandates in a way that stands up to such a report.
Consequences of a refund
A refund of a direct debit undoes the payment, not the agreement behind it. Betaalvereniging Nederland puts it plainly: a refund does not release the payer from the payment obligation. If an agreement was made, the creditor can still demand payment. For the creditor the consequences of a refund are practical too: missed income and extra admin. If you have a debit refunded because the amount is wrong, it is a good idea to also tell the creditor why.
Good to know: a refund is a right of the payer, not a way to make a debt disappear. If the amount is owed, it has to be paid another way.
When a direct debit fails
Not every direct debit gets through. According to Betaalvereniging Nederland too little money in the account is the most common cause. Other causes are a collection the payer refused in advance and a block the payer has set up with the bank. In the EPC rules all deviations from normal processing are called R-transactions. In plain words:
After a failed direct debit, talking is the next step. Betaalvereniging Nederland advises payers to agree with the creditor to pay another way, for example by an ordinary transfer. A creditor that presents a failed one-off direct debit again does so, according to the EPC, as a one-off direct debit with the same mandate reference and creditor identifier. Good communication and an alternative payment method limit the risks for the creditor.
Stopping a direct debit
Stopping a direct debit starts with the creditor: withdraw the mandate there, so that no new debits follow. If it is about one announced collection, the payer can refuse it in advance at its own bank. If the creditor still keeps collecting after the withdrawal, the bank can block the account for that creditor. The SEPA Regulation also gives payers the right to limit direct debits to an amount or a frequency, and to block direct debits, from everyone or from everyone except a list of allowed creditors.
For businesses it works differently. If neither the payer nor the creditor is a consumer, a bank does not have to offer those options under the same regulation. A business owner who wants to limit or block a direct debit should therefore ask their own bank what is possible for a business account. Even then the first step stays the same: letting the creditor know that the mandate ends.
Collecting by direct debit as a business owner
If you want to collect by direct debit yourself, you need a direct debit agreement with a bank or a recognised direct debit service provider. A check comes first: according to Betaalvereniging Nederland the bank or provider first assesses whether a business customer qualifies for a direct debit contract. A bank may require a business payment account for it. The contract comes with the creditor identifier, which goes with every collection instruction.
Collecting gives predictable income, but no certainty. With the Core direct debit the customer can claim a refund for 8 weeks, and even an amount already credited can still be reversed. Betaalvereniging Nederland advises creditors to set up collection processes that take possible refunds and blocks into account. With business customers the business direct debit is an option, because the customer cannot refund a direct debit with a valid mandate there.
Getting started with SEPA direct debit in 4 steps
A business owner who wants to start with SEPA direct debit sets it up in this order:
Apply for a direct debit contract with your own bank or a direct debit service provider. After your business has been assessed, you get a creditor identifier.
Have customers sign a mandate on paper or through a recognised digital route, and keep every mandate with its reference.
Send the customer a pre-notification with the collection date and amount, at the latest 14 calendar days before or within the agreed time limit.
Submit the collection file within your bank’s times and check after the collection date which direct debits failed or were refunded.
SEPA direct debits and Vivid
Vivid offers a business account with a Dutch IBAN, from which you can have SEPA direct debits paid. Vivid reserves the amount of a scheduled direct debit in the afternoon of the working day before the collection date. If direct debits still run on another account, they can be switched. For customers who pay you, invoices and payment links are part of the account:
If a direct debit from a customer fails, a payment link or an invoice with a QR code is a way to still receive the amount, without waiting for a new collection date.
Vivid in short: a Dutch IBAN for the direct debits you pay, and invoices with a QR code and payment links for customers whose direct debit fails.
Getting paid by customers with Vivid
A business account with a Dutch IBAN, with invoices and payment links for your customers included.
Frequently asked questions
What is a SEPA direct debit?
A payment started by the payee, the creditor. With the payer’s mandate the creditor collects the amount from the payer’s bank, once or on a recurring basis. The date and amount are announced in advance.
How long can you have a direct debit refunded?
With the Core direct debit up to 8 weeks after the debit, without giving a reason. If there was no valid mandate, an unauthorised direct debit can be reported to the bank up to 13 months after the debit. For a business account a different period may have been agreed. A business direct debit with a valid mandate cannot be refunded.
What is the difference between SEPA-incasso Algemeen and Bedrijven?
Algemeen is the Core direct debit, for consumers and businesses, with an 8-week refund right. Bedrijven is the business direct debit, only for payers who are not consumers. There the mandate is registered with the payer’s bank, and a direct debit with a valid mandate cannot be refunded.
How do you stop a direct debit?
Withdraw the mandate at the creditor. You can refuse an announced collection in advance at your bank. If the creditor keeps collecting, the bank can block direct debits from that creditor. For a business account a bank does not have to offer every block.
What happens when a direct debit fails?
The amount is not debited or goes back to the payer. The most common cause is too little balance. The payment is still owed, so payer and creditor agree another way to pay, such as an ordinary transfer.
What do you need to collect by direct debit yourself?
A direct debit contract with a bank or a recognised direct debit service provider, which first assesses your business. With it you get a creditor identifier. You also need a mandate from every customer and, for every collection, a pre-notification of the date and amount.
What does a SEPA direct debit cost?
The SEPA rules have no fixed price. According to the European Payments Council each bank decides for itself which charges it applies to its customers. If you want to collect, ask the bank or provider of the direct debit contract for its rates.
This article provides general information and is not legal or financial advice. The rules mentioned are as published by Betaalvereniging Nederland, the European Payments Council, in Regulation (EU) No 260/2012, Directive (EU) 2015/2366 and the Dutch Civil Code, and may change. Vivid’s payment services are provided by Vivid Money S.A., an electronic money institution authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg; its Dutch branch is registered with De Nederlandsche Bank (DNB) as an electronic money institution. Brand names mentioned belong to their respective owners.
