The European Payments Council (EPC) has published guidance on ‘reason codes’ for SEPA Direct Debit (SDD) ‘R-transactions’ to clarify which reason codes should be used and when, as it appears confusion still remains among payment service providers.

A normal direct debit collection may fail for any of the following reasons: refunds, returns, rejects, refusals and reversals (hence the name ‘R-transactions’).  The possible causes of an R-transaction are set out in the SDD Core and SDD Business to Business Rulebooks, which detail the data required to be provided to the payee.  That data, known as ‘reason codes’, identifies the type of the R-transaction, the initiator of the R-transaction and the reason for the R-transaction.

The guidance details that it is imperative for the bank of the payer to advise the bank of the biller (creditor bank) of the failed transaction and the reason code for the failure.  This will enable the creditor bank to advise the biller in relation to the situation. 

What this means for you

The guidance serves as a reminder to all payment service providers who have signed up to the SDD Schemes that specific R-transaction reason codes must be provided when reporting on a failed transaction.  It also recaps on the relevant timelines.  Use of the correct reason codes streamlines the process for handling rejections.  A working knowledge of the principles contained in the guidance is therefore essential when dealing with returned direct debit transactions to ensure that current practices are compliant.