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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 Euro.

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 supervisory requirements.

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 delivered.

The FSA will shortly be issuing guidance to help businesses understand their compliance duties.


1.       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 Novmber 2009.

2.       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.

3.       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.

7.       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

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