Direct Debit
The Direct Debit scheme is in place to ensure that regular payments such as bill payments, subscriptions and other scheduled payments follow set rules for refunds, and run to a reliable and convenient time scale
Advantages of the scheme to creditors and debtors are below;
Creditors
The scheme offers the following benefits for creditors
- Simple cost efficient method of collecting funds
- The ability to determine the exact date of collection
- The payment is received within a pre-determined timeframe
- The opportunity to optimise cash flow
- Simple processing of payments received
- The ability to automate exception handling of payments
- Reduction of operational costs
- Increased security
Debtors
The scheme offers the following benefits for debtors
- Simple means of payment, allowing them to avoid late payment
- Straight forward reconciliation of debits
- Increased security with electronic signatures
- Fast and simple refund mechanism
The SEPA direct debit scheme is split into 2 sections for adherence to SEPA, one of which is mandatory the other is optional. The 2 areas are
Creditor Bank
This section of the EPC adherence rulebook is optional, meaning that the bank does not have to be able to execute instructions from the creditor on the debtor bank.
Debtor Bank
To be direct debit compliant you must be adherent to this part of the EPC rulebook. This means the bank must be able to execute collection of the funds from the debtors account.
Below is a diagram showing the flow of Direct Debits under the SEPA scheme.
