Rejects, Returns and Refunds: pacs.002, pacs.004 and the 8 Week Rule

A reject happens before the due date, when the debtor bank refuses the collection during validation. The debtor bank sends a pacs.002.001.10 Payment Status Report with status RJCT, carrying a reason code that explains the refusal. Common reject reasons include an invalid mandate reference, a closed account, or a collection that arrived after the cut-off for the due date. A rejected collection never debits the debtor account, so no money moves, and the creditor must correct the problem and send a new collection for the next due date. The reject is the cheapest failure, because it costs only a correction. A return happens after the due date, when the debtor bank has already debited the account but must send the money back. The debtor bank sends a pacs.004.001.09 Payment Return, carrying the original mandate reference, the returned amount, and a reason code. A return can happen because the account had insufficient funds on the due date, because the account was closed, or because the debtor asked for the money back within the refund period. Unlike a reject, a return moves money back through settlement, and the creditor bank debits the creditor account, so the utility must chase the unpaid bill through a different channel. A refund is the debtor right to claim the money back after a collection has settled, and the SDD Core scheme gives the debtor two different refund windows. Within eight weeks of the debit, the debtor can claim a refund with no questions asked, and the debtor bank must return the funds. Within thirteen months, the debtor can claim a refund if the collection was unauthorised, which means there was no valid mandate or the mandate did not cover the collection. The eight week refund needs no reason, while the thirteen month refund needs the debtor to show that the collection was unauthorised, and the creditor must be able to produce the mandate to defend it. For the worked example, the refund rules shape how Stadtwerke Linden manages its risk. If Jonas Weber notices on 20 November that the EUR 89.99 collection was twice the amount he expected, he can ask Meridian Bank Munich for a refund within eight weeks, and the bank must return EUR 89.99 without asking why. If Jonas Weber discovers in March 2027 that a collection was taken after he had cancelled the mandate, he can claim an unauthorised refund within thirteen months, and the utility must produce the mandate or accept the return. The creditor therefore prices the risk of refunds into its business, and it keeps mandates available for thirteen months after the last collection. Worked example with numbers: on 20 November Jonas Weber notices that the EUR 89.99 collection was twice the amount he expected, and he asks Meridian Bank Munich for a refund. Because the debit happened within the last eight weeks, the bank must refund EUR 89.99 with no questions asked, and must then claim the money back from Harbour Bank Frankfurt through a pacs.004 return. If Jonas Weber had waited more than eight weeks, he could still claim a refund within thirteen months, but only if the collection was unauthorised, and the bank would need to check the mandate first. The refund rules mean the utility must hold enough liquidity to fund refunds, and must check its collections carefully before sending them. Failure and recovery: a reject, a return and a refund are three different events, and confusing them is the most common error in direct debit operations. A reject happens before the due date, when the debtor bank refuses the collection during validation and sends a pacs.002 with status RJCT. A return happens after the due date, when the debtor bank has debited the account but must send the money back with a pacs.004. A refund is the debtor right to claim the money back after settlement, and it is the debtor bank that pays the refund and then claims it from the creditor bank. A team that treats a return as a refund will credit the wrong party, and a team that treats a refund as a reject will miss the eight week deadline. For a business analyst, product owner or subject matter expert, the R-transaction requirement must state the three events, reject, return and refund, the message for each, pacs.002, pacs.004 and the refund claim, and the reason codes that explain each one. The requirement must also state the two refund windows, eight weeks with no questions asked and thirteen months for an unauthorised collection, and must state that the debtor bank pays the refund first and claims it back afterwards. The test pack must include a reject before the due date, a return after the due date, and a refund within eight weeks, because each case exercises a different R-transaction. Source: EPC SDD Core Rulebook 2025; last reviewed 7 November 2026.