What should I do if I am in doubt about an SDD transaction?

Summary
Returns/Refunds of SDD payments/mandates
What is a returned SEPA Direct Debit (SDD)?
What are the main reasons for returned SEPA Direct Debit (SDD) payments?
How do I identify a returned SEPA Direct Debit (SDD) in my dashboard?
How do I dispute a returned SEPA Direct Debit (SDD)?

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Returns/Refunds of SDD payments/mandates

What is a returned SEPA Direct Debit (SDD)?

On or after the settlement/due date of a SEPA Direct Debit (SDD Core or B2B), the debtor's bank can carry out an interbank return to the creditor's bank, for its own reasons (e.g. insufficient funds) within 5 banking business days for an SDD Core transaction and 3 banking business days for an SDD B2B transaction, or in response to a request from the debtor (refund request).

Returned SDDs result in:

  • A re-credit to the debtor of the total amount (partial refunds are not permitted) of the debit from the debtor's account
  • A debit of the same amount from the creditor's account

If the return request is initiated by the debtor, the dispute options/deadlines are different for SDD Core and SDD B2B:

TYPE OF SDD

DISPUTE TERMS

SDD CORE

• Between D and D + 8 weeks (D = debit date of the debtor's account/bank working days): return possible with no reason/justification required from the debtor and automatically processed by the debtor's bank

• Between D + 8 weeks and D + 13 months (D = debit date of the debtor's account/bank working days): return only possible if the debtor disputes the payment on the grounds of an "unauthorised transaction" and subject to the debtor's bank undertaking the proof of consent verification procedure

SDD B2B

• Between D and D + 13 months (D = debit date of the debtor's account/bank working days): return only possible if the debtor disputes the payment on the grounds of an "unauthorised transaction" and subject to the debtor's bank's undertaking the proof of consent verification procedure

 

What are the main reasons for returned SEPA Direct Debit (SDD) payments?

The main reasons for Returned SDDs (Core or B2B) as well as the recommended follow-up steps are outlined below.
The return codes and their description are automatically included in the notes on the returned SDD transaction in your system.

RETURN CODE

CODE DESCRIPTION

RECOMMENDED CREDITOR ACTION

AC01

Incorrect bank details (e.g. invalid debtor IBAN, debtor's bank account not denominated in EUR)

• Contact the debtor to check the bank details

• Correct the debtor's bank details in your Company system

• Issue a new direct debit instruction

OU

• Decide on an alternative method of payment (e.g. bank transfer) with the debtor.

AC04

Account closed

• Contact the debtor to obtain new bank details

• Correct the debtor's bank details in your Company system

• Issue a new direct debit instruction

OU

• Decide on an alternative method of payment (e.g. bank transfer) with the debtor.

AC06

Blocked account

• Contact the debtor to obtain new bank details

• Correct the debtor's bank details in your Company system

• Issue a new direct debit instruction

OU

• Decide on an alternative method of payment (e.g. bank transfer) with the debtor.

AC13

Debtor account is not a business account (SDD B2B only)

• Contact the debtor to obtain his business/corporate account details

• Correct the debtor's bank details in your Company system

• Issue a new direct debit instruction

OU

• Decide on an alternative method of payment (e.g. bank transfer) with the debtor.

OU

• Set up a Core direct debit mandate with the debtor

• Issue a new direct debit instruction

AG01

Transaction not permitted on this type of account (e.g. savings account)

• Contact the debtor to obtain new bank details

• Correct the debtor's bank details in your Company system

• Issue a new direct debit instruction

OU

• Decide on an alternative method of payment (e.g. bank transfer) with the debtor.

AM04

Insufficient funds

• Ask the debtor to add funds to his account

• Issue a new direct debit instruction

OU

• Decide on an alternative method of payment (e.g. bank transfer) with the debtor.

AM05

Duplicate

• Determine if it is a genuine duplicate.

MD01

No mandate

(Mandate on the debtor's account no longer valid, mandate cancelled by the debtor, refund of unauthorised transaction, B2B mandate not submitted to the bank)

 

• Contact the debtor to obtain more information/to ask him to give the signed mandate to his bank (in the case of SDD B2B)

• Issue a new direct debit instruction

OU

• Decide on an alternative method of payment (e.g. bank transfer) with the debtor.

MD07

Debtor deceased

• Terminate the debtor's contract

MS02

Refused by debtor/unknown reason

• Contact the debtor

MS03

Unknown reason

(most common return code/catch-all)

• Contact the debtor

The "quality" of the return codes varies and depends on the debtor's bank. Lemon Way has no additional information and is unable to contact the debtor's bank if a return code appears to be incorrect or unclear.

How do I identify a returned SEPA Direct Debit (SDD) in my dashboard?

An SDD card return, just like a card chargeback, results in two (or even three - see below) transactions on your dashboard:

  • The return transaction (Method = SDD/Type = Outgoing/Status = Successful) in the customer payment account to which the original transaction was credited, showing the reason for the return in the Notes field (as reported to Lemon Way by the debtor's bank) and the ID of the original transaction in the Original Transaction In the event that the balance of the relevant customer payment account is insufficient for the return transaction to be debited, Lemon Way automatically performs a P2P transfer from your merchant payment account (SC) to the relevant customer payment account for the shortfall before proceeding with the Return transaction.
  • The transaction corresponding to the return fee charged by Lemon Way (P2P from your merchant payment account to the Lemon Way payment account for the amount specified in your contract)

Returned SDD transactions can be retrieved via the API or retrieved/exported manually from your dashboard.

Dashboard Version 1

To identify Chargebacks in your dashboard you need to follow these steps: Operations Overview. You can select filters and select:

  • Method: SDD
  • Type: Outgoing
  • Stats: Success
  • Comments: chargeback

Dashboard Version 2

To identify Chargebacks in your dashboard you need to follow these steps: Operations All.  You can select filters and select:

  • Method: SDD
  • Type: Outgoing
  • Status: Completed
  • Comment: chargeback

How do I dispute a returned SEPA Direct Debit (SDD)?

In the event of the debtor disputing an allegedly unauthorised transaction (between D + 8 Weeks and D + 13 Months for SDD Core, between D and D + 13 Months for SDD B2B/D = Debit due date/banking business day), the debtor's bank sends a request to the creditor's bank, which we will forward to you by email.
You then have 5 banking business days after Lemon Way sends the request to provide us with the necessary information (e.g. a copy of the mandate) as well as any supporting documents that you feel are appropriate/relevant if you wish to contest the return.
Once forwarded by Lemon Way to the debtor's bank (via the creditor's bank), this information will be reviewed by the debtor's bank to settle the dispute (no later than 30 calendar days after receiving the customer's objection) in one of the following ways:

  • Accept thedebtor’s/customer’s objection
  • Reject the debtor's/customer’s objection; the dispute must then be resolved between the creditor and the debtor

If the debtor's bank accepts the debtor's objection, it issues a repayment request to the creditor's bank.
When the creditor's bank receives the refund request, it immediately debits the Lemon Way account (which then processes the return transaction in your Company environment) and forwards the funds to the debtor's bank for re-crediting.
Should you disagree with the direct debit being refunded to the debtor, it is up to you to contact the debtor to resolve the dispute with him or her, if you wish to do so.

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