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What happens after a return debit note or a chargeback?

For recurring payment methods such as SEPA direct debit, credit card payments and PayPal it can happen that after a successful payment transaction, return debit notes or chargebacks occur.

In the following, this article explains how to react, when a refund is triggered by the end customer.

What is a chargeback?

A chargeback can occur for debit cards (and the associated bank account) or for credit cards.

It is a debit to a payment card that is reversed

  • after a customer has actively and successfully disputed an item on their statement or transaction report.

  • due to missing funds (for direct debit).

  • when a merchant actively returns the amount to the customer (in most cases after a credit note). Then we are speaking about a Refund.

SEPA Direct Debit

Regarding Direct Debits, there are two cases that are treated like chargebacks.

The SEPA core book differentiates - among others - these two terms when it comes to exception handling (p.30):

  • Refunds are claims by the debtor for reimbursement of a direct debit. Any direct debit transaction can be actively refused by the end customer within 8 weeks ( SEPA core book p.50)


    Note A request for a refund for an unauthorized transaction (after the eight weeks refund period) can be made within 13 months after the debit date of the disputed collection. p.52

  • Rejects are collections that are diverted from normal execution, prior to inter-PSP Settlement, for i.e. technical reasons such as invalid format, wrong IBAN check digit.

Refunds of collections and rejects must be cleared and settled via the CSM used for the clearing and settlement of the initial collection. Clearing and Settlement Mechanisms (CSMs) are the processes underlying all payment transactions exchanged between two payment service providers (PSPs).

Thus the consequences of both can be compared to chargebacks for credit cards.



Please be aware, that the proposed SEPA Direct Debit PSP integrations in billwerk are not designed to handle manual transfers, but only automated SEPA Direct Debit payments.

Credit cards

In this context, a chargeback involves reversing a payment and initiating a dispute resolution process. In general rule, chargebacks take place between a merchant and a credit card-issuing bank or a consumer.


Concerning PayPal, we would like to refer to their documentation which explains in detail how chargebacks are initialized in this context:

Billwerk's reaction to a chargeback

A returned direct debit is considered a serious payment problem by billwerk.

In this case, our application reacts as the following:

  • Recurring payments get deactivated in the contract: Contract details > Recurring Payments : Off.

  • Unconfirmed ledger entry for the payment is confirmed

  • A confirmed chargeback is registered.

Anticipation using payment escalation process

In order to be prepared for handling charge backs, we invite you to set up a payment escalation process (if not yet done) or to adapt your current process. Please read: How can I configure the payment escalation?


Please beware: The hosted customer portal can be used in the escalation incl. the send out of the customer portal URL.

Limitation: The customer has to react within (maximum) 7 days. Afterwards, the portal expires and the customer has to ask for a new link.

Read this article for more information: How can I use the hosted signup page and the hosted customer portal?.

Within the process, instruct the customer to go to the contract portal to resolve the problem.

For this, please set up an email template and include the following information:

Based on the feedback of your client:

  • The payment method is validated, you can reactivate the recurrent payments.

  • If the mean of payment is not correct, please invite the end customer to register a new mean of payment.

Consequences of a new payment method

There are two use cases that can occur:

1. Case: No sufficient funds on the account

The chargeback was caused by insufficient funds on the bank account when the payment transaction was triggered.

Once customers ensured that the funds are sufficient for the payment, there are two options:

  • Either they can inform the merchant about the situation. The same bank information can be used afterwards. The merchant can reactivate the recurring payments as explained below.

  • Or they can add the same payment details again in the customer portal. This will automatically update the payment mandate and trigger the payment transaction.

2. Case: The payment data of the customer is not up to date

It is possible that the credit card expired or the bank information of the customer changed.

  • Once the customer updates the payment means in the customer portal, a new payment will be triggered that withdraws all open receivables from the end customer’s mean of payment.

  • The recurring payments are activated automatically, and all future invoices will be paid by automatic transactions.

Reactivate manually the recurring payments

Please follow these steps to manually reactivate the recurring payments and start another payment run.

  1. Click on the Customers tab in the main menu.

    Open the customer's Contract Details.

  2. In the list, click on the Name of the customer you are interested in.

  3. On the Customer Details page, you can find the list of Contracts in the section of the same name.

  4. Open the contract you need by clicking on the Contract ID in the first column.

  5. Activate the Recurring payments checkbox.


Note Since bank processing fees are incurred for chargebacks, you can decide whether to charge the fee to the customer.