What to do if your SEPA direct debit gets rejected

4 mins

August 01, 2022

Whether it’s for paying your internet bill, office rent, loans or even your social charges, SEPA direct debits (article in French) are often the easiest option for settling your recurrent business expenses.

All you have to do is provide your bank information (relevé d’identité bancaire or RIB) to your creditor and sign a direct debit mandate to set up automatic bill payments. One less task to keep in mind.

But sometimes your automatic direct debits can be rejected and that’s where things can get complicated. Normally you would have to contact your beneficiary ASAP to find another way to pay your bill. End result: you waste precious time. Time you could spend growing your business.

This article explains in detail why your SEPA direct debits can get rejected and offers some best practices to help prevent this from happening in the future.

Why was your SEPA direct debit rejected?

There could be a few reasons why your SEPA direct debit got rejected:

there were insufficient funds on your business account;
you did not forward the B2B direct debit mandate to your bank or payment institution;
the B2B direct debit mandate was incomplete or contained errors.

SEPA direct debits can’t go into effect without a completed, signed mandate being sent to your bank. It’s a very important document because it serves as a formal authorization to allow your creditor to collect payment from your account. Without the mandate, there is no debit of funds.

In any case, contact your bank as soon as possible to understand exactly why your direct debit didn’t go through - and sort out a way to pay in the meantime.

Can I request that a SEPA direct debit be rejected?

Know that as the account owner you can always ask for a SEPA direct debit to be rejected at any time.

The steps you’ll need to take vary depending on whether the payment is already processed on your account or not.

Rejecting a processed SEPA direct debit

Did you just realize that an erroneous debit was made to your account (an incorrect amount, for example)? Or worse, you never gave authorization for that payment to be debited?

Not to worry: you can reject the direct debit up to 8 weeks from the date the transfer was initiated.

For debits made without your authorization, this deadline is extended to 13 months from when the debit was processed. We call this a delayed debit.

You can request a reimbursement for this payment error from your bank.

Want to know exactly how to dispute a direct debit on your Qonto account? This article tells you how.

Rejecting a SEPA direct debit before it takes place

Are you having trouble with your cash flow and you need to reject a SEPA direct debit? Or maybe you ended a contract with a creditor and you want to suspend your payments?

Generally speaking, your bank would need you to send them a formal request for rejecting payment either by email or post, and you would need to include:

the scheduled date for the direct debit;
your creditor’s contact information.

At Qonto, rejecting direct debits is easy. You can do it online in just a few clicks. You just need to go to your Direct debits section in your desktop app, select the SEPA mandate in question and then click “Suspend future direct debits”. No future debits for this creditor will take place. You can always resume payments by clicking “Reactivate direct debits”. You can find more details in this dedicated article.

What to do in the event of a SEPA direct debit rejection

Just noticed one of your direct debits was rejected? We suggest you contact your beneficiary as soon as possible to sort out a new payment method. You can choose to issue a direct payment order or suggest payment via transfer or check.

What are the risks associated with rejected SEPA direct debits?

Payment error fees

Rejected SEPA direct debits (or incoming transfers) can cost you dearly. In France, banks are allowed to set their own rates for rejection fees and they can go up to €20 per transaction. Ouch.

Normally your bank can’t bill you for both a rejection fee as well as transaction fee. Be sure to double check your account statements, as some banks might try to ignore this rule. Want to know more about hidden bank fees? We wrote an entire article on the subject.

Late fees with creditors

Payment issues can have rather unfortunate consequences for your business, namely in the form of late payment fees.

If you’re late paying a bill, your creditor can ask to be compensated for the delay by charging a 10% fee on the balance due, as well as a collection fee of €40.

The usual deadline for payments is set at 30 days from receipt of the invoice. Any payment past that date is considered late.

Do you pay your social charges and taxes by SEPA? Know that if you pay past the due date, institutional creditors can also impose a late payment penalty.

SEPA direct debit rejections and banking restrictions

You cannot be barred from holding a bank account because of a rejected direct debit. Banking restrictions (interdiction bancaire) apply to those who bounce checks regularly.

Similarly, if you try to pay off a business loan and your payment is refused, you won’t be entered into the French Bank’s National Register of Household Credit Repayment Incidents (Fichier national des incidents de remboursement des crédits aux particuliers or FICP), since this registry is geared towards individuals and not businesses.

How to get ahead of SEPA direct debit rejections with Qonto

Keep an eye on your accounts

Often the reason why transfers get rejected is insufficient funds, i.e. you don’t have enough money on your account to fulfil the scheduled payment. So it’s important to keep a close eye on your account to avoid any payment mishaps. With Qonto, you have a real-time view of your incoming and outgoing funds.

And that’s not all. We even send you a reminder email a few days before your scheduled direct debit so you can prepare accordingly and top up your account if necessary.

Legally, banks have no obligation to alert you if a payment gets rejected. Be vigilant and regularly check your account balance to avoid any nasty surprises.

Optimize your cash flow

All it can take is one unpaid bill or even a late payment by a client to throw off your cash flow and negatively impact your ability to pay your outstanding expenses (loans, supplier payments, etc.).

To help you avoid this inconvenience, we wrote an in-depth article on how to optimize your company’s cash flow. We share all our tips and best practices to better manage your everyday business finances.

What if it’s too late?

Did your SEPA direct debit get rejected? At Qonto, we put your payment on hold for 48 hours to give you time to sort things out. Once that window has passed, we’ll try to process the payment one more time.

ABOUT THE AUTHOR

Panama Harris

Panama is a Copywriter at Qonto with over 15 years' previous experience working as a freelancer around the world. Her mission is to take the mystery out of entrepreneurship and make it more accessible.