A debit entry is a payment obligation assumed by someone (the debtor or payer), who must consequently pay someone else (the payee). When this happens, the amount will be recorded in the debit section of said account, reducing the account holder's balance. The bank will charge the funds received to us, with our prior authorisation, as account holders. Then a debit will be carried out, with the aim of speeding up payments between companies, which means the money is received directly without any intervention on the part of the customer. This means that it will be the bank itself that transfers money from our account to the account of a third party, as payment of a debt. In this case, the customer and account holder (as the payer of the payment) will have to consent to the transaction, either before the payment is made, or at the time it is made, and will also have to consent to the method of performing the transaction: in cash, via cheque, transfer or direct debit, among others.
For this reason, debits are frequently used between SMEs and the self-employed, and they even provide an option that entities sometimes use in order to pay money into other banks without generating any costs.
Regulations governing debits
We must not forget that, when making a debit, the bank will be using our money to perform payment and collection transactions. For this reason, a law was required to regulate the conditions under which this process was carried out, and even more so with all the new payment methods that technology has brought about.
In this case, the regulation that regulates this process is Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015, which establishes a secure, reliable and regulated environment for these payment methods. Among other aspects, the regulations distinguish between individuals and companies, and for businesses, between large companies or SMEs.
Requirements for making a debit entry
First of all, the accounts must be within the SEPA zone and be registered in euros. In addition, transactions must be carried out under the same conditions, whether national or cross-border; they must be identified by the IBAN, and also contain the following information: maximum debit and payment terms, expenses and fees broken down, applicable exchange rate, if applicable; and the personal details of the payer, the payment service and the supervisory authority.