Disputes

Consumers can issue a chargeback on a completed SEPA direct debit transaction via their bank. Reasons for issuing a chargeback include:

• The consumer did not receive the product
• The consumer is unsatisfied with the product
• Fraud (the payment was not authorized)
• Insufficient funds
• Nonexistent or Incorrect IBAN

SEPA Direct Debit has no real-time authorization that checks the balance available on the accounts. The transaction will be in a successful state even if a consumer does not have sufficient funds in their bank account to complete it. This behavior will lead to a chargeback.

Thresholds

Chargeback ratios vary by industry and among individual merchants in a given industry.

Chargeback ratios, as seen by PPRO, are higher for SEPA Direct Debit than credit cards by SEPA's own design. As measured by transaction volume, an individual merchant's chargeback ratio exceeding 7.5% risks a response from PPRO to coordinate reducing the merchant's chargeback ratio and/or suspension of the merchant should chargeback mitigation be unsuccessful or at a volume that is considered an unacceptable risk by PPRO's banking partners.

Dispute process

It’s not possible to collect chargeback funds via SEPA Direct Debit. The merchant needs to collect the funds directly from the consumer, for example, via a collection agency.

Merchants using SEPA Direct Debit usually:

Ensure they have a good risk system in place, with velocity checks to mitigate the risk

Perform rigorous checks on the consumer before they allow SEPA Direct Debit payments, for example, completing credit checks, such as Schufa in Germany

Only allow a payment-guaranteed payment method for the first transaction with a particular customer

Employ a collection agency in case of chargebacks

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Note

A refund does not protect you from a chargeback.

Time frame

The standard chargeback window for SEPA Direct Debit is eight weeks. After that time, the likelihood of chargebacks decreases if the merchant handles a mandate confirming the consumer's agreement for being charged.

It is still possible to get a chargeback after eight weeks in case the bank fights the mandate. The percentage of chargebacks issued after that time frame is below 0.1%. This extended chargeback period is 13 months.