To realise the vision of a common European payments market the EU Commission has drawn up new regulations, intended to harmonise consumer protection laws in the European countries. These regulations will be introduced into Swedish legislation no earlier than April 1, 2010. In cooperation with the Swedish banks the Bankgiro has defined what the new regulations will entail for the Autogiro service.
What are the contents of the new law?
The new law will regulate the payer’s right to request a refund on an executed direct debit payment, thereby providing improved customer protection.
The definition of a refund
A refund is defined as the payers’ legal right to request and receive a refund on an executed Autogiro payment from their bank. There are two different scenarios in which a refund can be requested:
- A non-approved Autogiro payment was executed – i.e. a mandate had not been signed prior to the payment being made, or the mandate had been terminated before the payment was made.
- An approved Autogiro payment was executed – i.e. a mandate had been signed prior to the payment being made but the amount withdrawn was not specified and considered unreasonable.
Potentially more Autogiro payments with increased consumer protection Autogiro (Direct debit) services are very popular in many European countries and this is in part attributed to strong consumer protection regulations. Hopefully the result will be the same in Sweden, with the new regulations making payers feel more secure and more willing to use the Autogiro service.
What will the new law entail for you (the payee)?
The new law will not regulate your obligations towards the payer, instead it will clarify in which cases the payer’s bank has to execute a refund when a complaint has been made to them.
When can a payer request a refund?
The payer can request a refund in one of these two scenarios:
- There was no mandate at the time of the Autogiro payment execution – in this case the refund request has to be made no later than 13 months after the original payment date.
- There was a mandate at the time of the Autogiro payment execution but the amount was not specified and considered unreasonable - in this case the refund request has to be made no later than eight weeks after the original payment date.
How will the refund be executed?
When the payer turns to the bank requesting a refund the new law will require the bank to investigate the payer’s right to the requested refund. If the investigation shows that the payer is entitled to a refund the bank will execute the refund from the account that is connected to the Autogiro service.
You will be informed of the executed refunds through the standard Autogiro statement of accounts sent to you on a regular basis.
A claim may remain
Even if the payer’s bank executes the refund a payer claim may still remain, depending on the reason for the refund. In this case you are responsible for informing your customer as well as sending out reminders etc. if necessary.
Limited number of refunds in other countries
In the European countries where the refund option already exists in Direct Debit services experience shows that refund requests only amount to a small fraction of the total number of Direct Debit payments. It also shows that the refund option is mainly used in cases where non-approved Direct Debit payments have been executed.