Credit transfers and direct debits in euro (SEPA)

Payment service providers carrying out credit transfers or direct debits denominated in euro may be subject to specific requirements under the SEPA Regulation.

The Single Euro Payments Area 

The Single Euro Payments Area (SEPA) aims to ensure that European consumers, businesses and public authorities can make and receive payments in euro under the same basic conditions, rights and obligations.

The SEPA Regulation (Regulation (EU) 260/2012) sets out technical standards, and conduct and information requirements for credit transfers and direct debits in euros.

The SEPA Regulation applies to:

  • payment service providers that are reachable (see below) for euro payments
  • credit transfers and direct debits denominated in euros – as long as all the payment service providers involved in the transaction are based in one of the SEPA countries

Payments to which the SEPA Regulation does not apply:

  • transactions not denominated in euro – including all sterling-denominated transactions
  • card payments
  • internal transfers within payment service providers
  • most payments transmitted over large-value payment systems (eg, TARGET, or EURO1)
  • money remittance and e-money transfers where neither of the accounts involved is a payment identifiable by IBAN, and
  • own-account payments by, and payments between, payment service providers

What firms have to do 

When a UK-based firm carries out credit transfers or direct debits denominated in euros to an account in one of the SEPA countries, they need to ensure the following:

Message formats: firms must use the ISO 20022 XML for message formats in the interbank space. Payment service users who send or receive payments in batch files and users submitting batch payment files must also use this message format, except in the case of business to business payments where neither business is a micro-enterprise.

Business Identifier Code (BIC): firms must not make it a mandatory requirement for the payer or payee to provide the BIC to initiate a payment transaction. They should use IBAN instead.

Reachability: Payment service providers reachable for euro credit transfer or direct debit services at national level must also establish European-wide reachability by being part of one of the EU-wide schemes.

Interoperability: firms must ensure they use euro payment systems which are technically interoperable according to the standards developed by international or European standardisation bodies.

Multilateral Interchange Fees: firms must phase out per transaction multilateral interchange fees (MIFs) for direct debits. Firms will be allowed to use MIFs on R-transactions (which include for example, rejected and recalled transactions) under certain strict conditions.

Consumer protection: firms have consumer protection obligations for direct debits (eg, the obligation, on a payer’s instruction, to limit, block or, where a right of refund is not available, to verify individual payments).

Payment accessibility: when making or receiving credit transfers or direct debits, users will not be allowed to specify the Member State in which the payment account of their counterparty is located. For example, a utility company based in an EEA country would not be able to direct its bank to only accept direct debits paid from a bank account in its own country.

Amendments to Regulation (EC) No 924/2009: The ceiling of €50,000 on the 'principle of same charges' has been removed and this now applies to euro-denominated payments of any value. Settlement-based national reporting obligations on payment service providers for balance of payments of any value (not just below €50,000) have also been removed.

When these requirements come into force 

UK payment service providers need to comply with these requirements by 31 October 2016. Firms may find the guidance available from Payments UK and the European Payments Council useful.

Establishing reachability

A firm must participate in one of the EU-wide SEPA schemes to be reachable for euro payments. More information about the schemes is available from:

You can find out more about the process and rules of adherence to the SEPA schemes from Payments UK and ask questions about the adherence process at NASO@paymentsuk.org.uk

The EPC maintains registers of all participants in SEPA payment schemes.

Transition to IBAN-only

Payments UK and Swift have developed a SEPA IBAN-only Directory to help firms and consumers in SEPA countries get the correct BIC for a UK payee from their GB IBAN. The Directory can be accessed free of charge.

Our role and oversight of overseas branches

The FCA is the competent authority overseeing SEPA compliance in the UK and we have been given powers for this under the Payments in Euro (Credit Transfers and Direct Debits) Regulations 2012. Any firms that believe they will have difficulty complying with their obligations should tell their supervisors as soon as possible.

If a firm has branches in other SEPA countries, the competent authorities designated by these countries will oversee branches’ compliance with these requirements. 

Reporting problems

From 1 February 2016 we will operate a dedicated SEPA compliance reports email address, which we will make available on this page. Our reports mailbox will be open to everyone, including consumers, firms and representative bodies based in the UK or overseas. If you believe that a business we regulate is not fulfilling its obligations under the SEPA regulation, you should report this, along with details of the relevant incident(s). 

The Financial Ombudsman Service is the UK’s designated out-of-court redress body for SEPA-related complaints, and for payments-related complaints in general.

If you are dealing with payment service providers (including branches of UK payment service providers) based in another SEPA country, report your concerns to the competent authority in that country and refer any complaints to the appropriate body there.