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Direct debit reversal following bankruptcy: Use or misuse of authority?

04/06/2012

On 16 September 2011, the Dutch Supreme Court delivered a judgment in a case that raised the question whether, if a bank reverses a direct debit ('reversal') following the bankruptcy of its account holder, it has acted unlawfully towards the other creditors in the bankruptcy or whether it has simply exercised an authority to which it is entitled. This article discusses the system of direct debit and the legal nature of the reversal. On the basis of an earlier ruling by the Supreme Court in 2004, it will become clear that the outcome in this case is not unexpected. The recent judgment by the Supreme Court also emphasizes the
importance of direct debit for payment transactions. The system only functions properly if there are sufficient safeguards constituting a general authority to reverse the direct debit.

Publication
Update_Banking_and_Finance_2012_June_c.pdf
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Authors

Wilmy-Westerhof-16-CMS-NL
Wilmy Westerhof
Advocaat
Amsterdam