The Legal Relationship In Direct Debit

As a new mode of non-cash payment, the main difference between Direct Debit and Transfer is that the former is initiated by the payee, but the latter by the payer. The basic parties in Direct debit procedure are payer, payee, payment institution and collection institution. The relationships between these parties are the fundamental relationship(the relationship between payer and payee), the relationship of collection(the relationship between payee and collection institution), the relationship of funds(the relationship between payer and payment institution), as well as the inter-bank relations(the relationship between payment institution and collection institution). The Direct debit procedure has two types, the first is called "debit commission procedure", in which the payer gives his payment institution a general instruction of debit; the second is called "debit authorization procedure", in which the payer gives the payee a individual or general debit authorization.Because of the fundamental transaction(e.g. selling, lending), a monetary obligation occurred between the payer and the payee(i.e. the creditor of the monetary obligation). Besides, they conclude a complementation agreement, in which both sides agree that the obligation should be satisfied by way of Direct debit procedure. With this agreement, the legal consequence of the fulfillment by means of Direct debit procedure is the so-called fulfillment in lieu of. That is to say, only when the payee acquires the money by way of Direct debit procedure, the original monetary obligation and the new obligation of paying through Direct debit are satisfied at the same time. But when the payment is failed because of the insolvency of the payer or only because the payment institution refused to pay, the payee has the option to request to realize his obligation through direct debit procedure or cash. The so-called "debit authorization procedure" should yet meet extra requirement, that the payer gives the payee a debit authorization. This authorization contains two instructions, the instruction to the payee und the instruction to the payment institution. The payer has the duty to keep adequate funds in the account or have sufficient credit line.The payee and collection institution conclude a contract of deposit and a contract of commission. The collection institution is obliged to collect money from the payment institution under the direction of the payee. Then the collection institution must note the amount of the funds to the credit of the payee’s account. The credit is independent of the underlying relationship between the payer and the payee. If collection institution complete this transaction, the payee shall pay remuneration.The relationship between the payer and the payment institution consist also of a contract of deposit and a contract of commission. In the situation of "debit commission procedure", the payer should give the payment institution a debit commission, so that the payment institution should pay to the payee(via collection institution). In the debit card case, the payment institution can debit directly the amount of money within the prepaid expenses(deposits) in the account of the payers and credit the amount to the collection institution. In credit card case, after the completion of cash payment von the payment institutions, the payment institutions hat the right to require the reimbursement of necessary expenses and interests. If payment institutions refuse to pay without legitimate reasons, the payee can only claim against the payer for the breach of contract, but can not claim directly against the payment institutions; meanwhile the payment institution shall be liable for breach of contract to the payer.