DIRECT DEBITS

Direct debit is a direct debit that is a non-document based order for payment. It consists of a an instruction from a customer to his bank authorising a third party to debit his account for variable amounts that occur with a certain frequency.

Direct debit systems are common in the domestic environment for utility payments (gas, electricity, etc.), but in certain countries and circumstances they are also used for frequent international commercial payments.

In this way, the creditor submits to the debtor's bank the proceeds from its sales.

Direct debit has similarities with the bill of exchange insofar as in both instruments someone requires another to pay an amount due to him.

In the case of a bill of exchange, it is effected by means of a commercial document, and in the case of a direct debit, it is a mandate given to the bank to debit an account. It would also have similarities with a transfer.

EDirect debit is a transfer order given by the creditor to the debtor's account.

In the same way that the transfer advantageously replaces the cheque, the direct debit would take over part of the functions performed by the bill of exchange.

In both cases, we would be dealing with dematerialised payment mechanisms that are processed electronically and are therefore automatic, massive, secure, fast and at very low cost.

In contrast, cheques and bills of exchange are physical documents, with certain advantages legal, but also with disadvantages in a highly technological environment. 

Both credit transfers and direct debits are subject to regulation and standardisation within the Single Euro Payments Area (Single Euro Payments Area - SEPA).