How to cancel SEPA direct debit mandate

Your customer has decided to cancel their subscription or perhaps the project you’ve been working on together has finished. After you’ve received the final payment, the next step is to cancel their direct debit. This process should be straightforward. Most of the time, all you have to do to cancel a direct debit is the opposite of what you did to set it up. If your finance department or bookkeeper took care of it, just let them know a direct debit needs to be cancelled. If the transaction was done through a payment processor like Mollie, it is possible to cancel the direct debit manually. Sometimes this is necessary when things change unexpectedly mid-way through a project or service. Most of the time though, a direct debit is cancelled automatically when the end of the contract or service agreement is reached. Can the customer cancel a direct debit?

Of course. A direct debit can be cancelled at any time by either the business or the customer. To cancel a direct debit mandate, customers need to either inform you directly or cancel via their bank.

UK banks

When your customer cancels the direct debit, their bank will inform your bank via an ADDACS message. (ADDACS is part of the interbank messaging system) If you’re using a payment processor, ADDACS messages are stored automatically. All you’ll see in the dashboard is that the direct debit has been cancelled.

Banks in the SEPA area (Europe)

The process for cancelling direct debits in the SEPA area is mostly the same as in the UK. The major difference is in the admin responsibility. In the UK, your customer’s bank stores all direct debit information. In the SEPA zone, you’re responsible for saving this information. Usually, your payment processor will offer this service, including keeping records of cancelled direct debits.

What if our contract isn’t over?

Customers are not obligated to pay by direct debit. If they choose to cancel an existing direct debit and offer a new payment method, such as a credit card, their account is still in good standing. Sometimes, customers will try to cancel a direct debit if they want to get out of the contract or are unhappy with the service. This is not allowed. Cancelling a direct debit is not the same as cancelling a contract. If a customer tries this, you are not allowed to continue charging their account, but you can do what’s allowed within the law to recover the rest of the money they owe.

How soon is a direct debit cancelled?

If the customer cancels the direct debit via their bank, it is cancelled immediately assuming it’s done during banking hours. If the customer has asked you to cancel the direct debit, you have up to three business days to do so. Any longer than that and you will be fair game for any legal action your customer wishes to take. Preventing a business from collecting unnecessary payment is an essential part of the whole direct debit system and the regulatory authorities in the UK and Europe do not look kindly on attempts to get around customer instructions. Final payment can go through unintentionally if the customer cancels too close to the regular payment draw. In these cases, you must refund the payment immediately even if they still owe you money.

Can I start the direct debit again if the customer changes their mind?

Not really. In some cases, the customer can instruct their bank to reverse the cancellation. If you have cancelled the direct debit, however, you must get a new mandate from the customer to debit their account again. Fortunately, with an online payment processor, this is fairly easy to do. Just set up a new product, contract or service agreement, have the customer input their information and make the first payment and you’re set.

Can I alter the payment amount without cancelling the direct debit?

Yes. Some companies use direct debits for instalments or predictable monthly payments. Others, like telephone companies, use them to withdraw a sum equal to the invoice for that month. In the case of variable payments, a new mandate is not required, but it’s a good idea not to surprise your customer. Unexpected charges lead to disputes, chargebacks and cancellations. To avoid this, send an itemised invoice along with an automatic debit notification two weeks before you draw the payment.

Grow your business with Mollie

Mollie helps you set up and cancel direct debits in the UK and Europe with ease. We take care of check-out compliance, document storage, and reporting so you can concentrate on what you do best. Find out how Mollie can help you grow your business.

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