Insufficient funds: a Core direct debit returned
Trigger: On the due date, Riya's account cannot cover the incoming collection.
What operations sees first: The debtor bank cannot apply the collection and operations receives an insufficient-funds return against the original transaction.
WHERE IS THE MONEY?
Never stayed with the biller — returned before or shortly after settlement; Riya was not debited.
DID SETTLEMENT HAPPEN?
The collection was reversed by a separately settled return.
WHO ACTS NEXT?
Bank Alfa (debtor bank) Asha Traders follows the rulebook and its bank agreement before deciding whether and when to submit another collection.
PLAY THE EXCEPTION
Trigger: On the due date, Riya's account cannot cover the collection, so Bank Alfa returns it under the applicable Core scheme timing and reason-code rules.
Asha Traders confirms the mandate
Asha Traders (creditor / biller)
Before pulling any money, the biller checks it holds a valid mandate that Riya signed authorising these collections. The mandate — not the invoice — is what permits the pull; no mandate means no right to debit.
Checks
- Mandate reference on file
- Debtor's IBAN matches the mandate
- Mandate not cancelled or expired
Step 1 of 11: Asha Traders confirms the mandate
- 01ProcessingAsha Traders confirms the mandateAsha Traders (creditor / biller)
- 05Clearing obligationThe CSM calculates obligationsSTEP2-T (CSM)
- 06SettlementPositions settle in central bank moneyBank Alfa (debtor bank) → Nordbank (creditor bank)
- 07PostingBank Alfa debits RiyaBank Alfa (debtor bank)
- 08 · EXCEPTION PATHProcessingBank Alfa cannot apply the collectionBank Alfa (debtor bank)
- 10 · EXCEPTION PATHSettlementThe return settles backNordbank (creditor bank) → Bank Alfa (debtor bank)
- 11 · EXCEPTION PATHPostingNordbank reverses the biller creditNordbank (creditor bank)
- OUTCOME
- Funds
- Never stayed with the biller — the collection was returned before or shortly after settlement.
- Settlement
- The collection was reversed by a separately settled return carrying the reason code.
- Who acts next
- Bank Alfa (debtor bank) — Asha Traders follows the Core rulebook and its agreement with Nordbank before deciding whether and when a new collection may be submitted.
Full step-by-step text (works without JavaScript)
- 01ProcessingAsha Traders confirms the mandateAsha Traders (creditor / biller)
Before pulling any money, the biller checks it holds a valid mandate that Riya signed authorising these collections. The mandate — not the invoice — is what permits the pull; no mandate means no right to debit.
- 05Clearing obligationThe CSM calculates obligationsSTEP2-T (CSM)
On the due date the CSM validates the collection and includes it in a clearing cycle, calculating who owes whom. In a pull this obligation runs from the debtor's bank to the creditor's bank — the reverse of a credit transfer.
Clearing produces obligations only. Nordbank does not have Asha Traders' money yet — that waits for settlement.
- 06SettlementPositions settle in central bank moneyBank Alfa (debtor bank) → Nordbank (creditor bank)
The calculated positions settle across the banks' accounts at the central bank. Money moves from Bank Alfa (debtor side) to Nordbank (creditor side) — funds flowing debtor to creditor even though the instruction came from the creditor.
- DR Bank Alfa settlement account — EUR 480.00
- CR Nordbank settlement account — EUR 480.00
- 07PostingBank Alfa debits RiyaBank Alfa (debtor bank)
Bank Alfa books the debit against Riya's account for the collected amount. This is the customer-facing side of the pull: money leaves the debtor's account because the mandate authorised it.
- DR Riya's current account at Bank Alfa — EUR 480.00
- 08 · EXCEPTION PATHProcessingBank Alfa cannot apply the collectionBank Alfa (debtor bank)
The account lacks sufficient funds on the due date. In Core, the creditor holds and manages the mandate; unlike SDD B2B, the debtor bank is not described here as pre-validating a registered mandate before every debit.
- 10 · EXCEPTION PATHSettlementThe return settles backNordbank (creditor bank) → Bank Alfa (debtor bank)
If settlement had already run, the return is cleared and settled in its own right — money moves from Nordbank back to Bank Alfa in central bank money.
- DR Nordbank settlement account — EUR 480.00
- CR Bank Alfa settlement account — EUR 480.00
- 11 · EXCEPTION PATHPostingNordbank reverses the biller creditNordbank (creditor bank)
Nordbank claws back the amount from Asha Traders and passes the reason code on, so the biller learns the collection failed for want of a valid mandate.
- DR Asha Traders' account at Nordbank — EUR 480.00
- OUTCOME
- Funds
- Never stayed with the biller — the collection was returned before or shortly after settlement.
- Settlement
- The collection was reversed by a separately settled return carrying the reason code.
- Who acts next
- Bank Alfa (debtor bank) — Asha Traders follows the Core rulebook and its agreement with Nordbank before deciding whether and when a new collection may be submitted.
THE TIMELINE
- 01Nordbank (creditor bank)Submits Asha Traders' collection interbank toward Bank Alfa on the due date.pacs.003
- 02Bank Alfa (debtor bank)Cannot debit Riya because the account has insufficient funds on the due date.
In SDD Core the creditor manages the mandate; the debtor bank is not modelled as pre-validating a registered mandate as it would in SDD B2B.
- 03Bank AlfaReturns the collection with the reason code back along the original route.pacs.004
- 04NordbankReverses the biller credit and passes the reason on to Asha Traders.
Resolution: The collection is returned under the applicable SDD Core timing and reason-code rules. If the original inter-PSP value had settled, the return creates a separate reverse settlement.
Sources for this scenario2
- Scheme-specific rule2025 v1.1 (EPC016-06)
2025 SEPA Direct Debit Core rulebook version 1.1 (EPC016-06) ↗ — European Payments Council · SDD Core return processing and insufficient-funds reason handling
- Simplified educational illustration
Payments Signal editorial teaching models — Payments Signal
What this simplifies: Single-CSM/single-cycle model; institution-specific handling and exact scheme timings vary.
Used wherever diagrams, scenarios, figures, or example values are didactic constructions rather than sourced facts; every such use carries a simplifications disclosure. All people, companies, banks, and list entries in examples are fictional.