Monday 14th July, 2014

On 10th July 2014, the European Payments Council (EPC) published ‘Guidance on Reason Codes for SDD R-transactions’ document.

One of the main benefits of the SEPA Direct Debit (SDD) Scheme is that it manages streamline exception handling, both at the process level and the dataset level. This allows straight-through-processing and automated exception handling end-to-end. Possible exceptions to the normal execution of a direct debit collection include refunds, returns, rejects, refusals and reversals (commonly referenced as ‘R-transactions’ and described in detail in the SDD Rulebooks).

The Business to Business rulebooks specify reasons which trigger an R-transaction, i.e. data elements required to convey information to the payee (biller) with regard to the R-transaction. These data elements, which are referred to as ‘reason codes’, identify the type of the R-transaction; name the initiator of the R-transaction; and detail the reason for the R-transaction.

The correct application of these reason codes by a debtor bank, (the bank of the payer), informing a creditor bank, (the bank of the biller), about a failed SDD collection is crucial to allow the biller to determine its reaction. This means: in the event of a failed SDD collection, the debtor bank must send a message to the creditor bank, which includes the correct reason code so that the creditor bank can inform the biller accordingly.

Section 4 of the newly published document provides guidance to SDD scheme participants about the reason codes to be used to report specific SDD collection issues.

The document also reiterates the timelines to be observed with the handling of R-transactions in line with the scheme rules. Last but not least, scheme participants are reminded that they must channel rejects, returns and refunds of SDD collections through the same clearing and settlement mechanism used for clearing and settlement of the initial SDD collection unless otherwise agreed between the SDD scheme participants.