New legislation on payment services to deliver benefits for consumers and businesses
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Issued 10 February 2009
The Government yesterday laid before Parliament regulations
to implement the EU Payment Services Directive (PSD) into UK legislation.
These regulations are due to enter into
force on 2 March 2009, and the PSD regulatory regime will be in place on 1
November 2009. The Government committed to early implementation in order
to help firms consider the incoming requirements and prepare for compliance.
The PSD was agreed unanimously among all EU Member States in
2007. It should deliver greater competition, economic efficiency gains, and
further innovation in the payment services market, while ensuring adequate
consumer protection across Europe. In the UK, the Financial Services Authority (FSA)
will be the regulator for most aspects of the PSD regulatory requirements.
Publishing the new legislation, the Financial Services
Secretary to the Treasury, Lord Myners, said:
“This legislation will drive competition in the market for
payment services, leading to greater efficiency, transparency and more
innovation, bringing further benefits and certainty to UK consumers and
businesses making everyday payments. It will also enhance consumer protection,
with the new rules for payment service providers.”
The benefits of the PSD will be seen by consumers and
businesses making everyday payments such as cash deposits and withdrawals,
credit transfers, direct debits, credit and debit card payments, money
remittance payments and other digital payment services. It affects domestic
payments made in Sterling, in Euro and other non-Euro EU currencies, as well as
cross-border EU payments from Sterling and other non-Euro EU currencies into
The PSD will also enable UK-based, non-bank businesses to
enter and compete in the EU payments market on the basis of a licence obtained
from the FSA in the UK. Licensing requirements are based on a prudential
authorisation regime. Small firms operating in the UK only will only need to
register with the FSA, and comply with the relevant anti-money laundering
Significantly, the legislation also introduces statutory
EU-wide conduct of business rules, requiring providers to properly inform their
customers about the payments they are making, and rights and responsibilities
for providers and users, to increase certainty about the way payments will be
The FSA will shortly be issuing guidance to help businesses
understand their compliance duties.
The Payment Services
Regulations, laid in front of Parliament today,
build on responses to the Government's consultation on the draft Regulations,
published in July 2008 and will implement the Payment Services Directive on 1
The Payment Services Directive (PSD) was formally
adopted on 13 November 2007. The UK Government has informally and formally
consulted a wide variety of stakeholders on the Directive since it was proposed
by the Commission in December 2005.
Payment services include credit and debit cards,
direct debits, standing orders, and money remittance. Payment systems are the
means by which payment transactions are processed, cleared or settled.
4. The Directive stipulates the
information that providers must give or make available to their customers
before, during and after a transaction is made, for example, how long the
payment will take to get to the recipient, and ensuring they are informed of the
exchange rate and charges for any currency conversions prior to initiation. It
introduces a maximum one-month notice period for customers to be able to
terminate a payment service contract with their provider, with no charges
allowed for terminating a contract after 12 months.
5. In terms of rights and
responsibilities, the Directive establishes what users must do, for instance in
protecting their PIN number, and what providers must do, for instance in
ensuring there is a phone line/means of contact for the user at all times, in
the event that their payment card is lost or stolen. It also explains what
happens when things go wrong with a payment, providing refund rights for
disputed payments, and sets out the circumstances in which the payment service
provider (e.g. the bank) will be liable.
6. The PSD mandates that by 2012
all electronic payments in Sterling or Euro, both national and cross-border EU
payments, must be made within the next business day after the transaction has
been initiated. This builds on progress already made, with the UK’s introduction
of the Faster Payments Scheme in summer 2008.
Kitty Ussher, the then Economic Sectretary to the
Treasury, announced in a speech to the Global Consumers Money Transfer
Conference in October 2007 that the Financial Services Authority will be the UK
regulator for the supervision of payment service provision, under the Directive,
and HMRC will continue to supervise the anti-money laundering requirements on
money service businesses.
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Article Published/Sorted/Amended on Scopulus 2009-02-10 11:31:27 in Business Articles