knowledge 6 December 2016 |

New Requirements for Payment Service Providers

Scope

The Payment Accounts Regulations apply to certain payment accounts held by a “consumer”, namely a person acting for purposes outside his or her trade, business, craft or profession. Consequently, they do not cover accounts held by corporate entities, including small and medium enterprises.

To be in-scope, a consumer payment account must be used primarily for the execution of day-to-day payments transactions and the consumer must at least be able to place funds and withdraw cash from the payment account as well as execute and receive payment transactions, including credit transfers to and from a third party. Accounts with more limited functions do not fall within the scope of the Payment Accounts Regulations.

The provisions on transparency/fee comparability and account switching apply to payment service providers (“PSPs”), including, for example, banks, e-money institutions and firms listed on the Central Bank’s Register of Payment Institutions. However, credit unions, friendly societies, An Post and the Central Bank are not in-scope.

The provisions on payment accounts with basic features apply to a ‘relevant credit institution’, namely an undertaking (other than a credit union):

• the business of which is to take deposits or other repayable funds from the public and grant credits for its own account, and
• that offers payment accounts to consumers in Ireland.

Transparency and Fee Comparability

One of PAD’s key purposes is to ensure that consumers can understand fees so that they are able to compare offers from different PSPs and make informed decisions as to which payment account is most suitable for their needs. In order to facilitate fee comparisons, PAD provides for the standardisation of terminology at EU level for the terms and definitions of the most representative payment account-related services. Each member state must then define its own list of the most representative services based on that standardised terminology. PAD also provides for the creation of templates for the presentation of certain fee information which PSPs must provide to consumers, namely, (a) the fee information document (“FID”) and glossary, and (b) the statement of all fees (“SoF”).

Under the Payment Accounts Regulations, PSPs must provide the consumer with a FID and a glossary in good time before entering a framework payment account contract with that consumer. The FID must list the most representative services linked to a payment account at national level and state the corresponding fees for all those services offered by the PSP. The glossary must provide clear, non-technical and unambiguous explanations for at least the EU standardised terminology used in the payment account services list and related definitions.

PSPs must provide the consumer with a SoF, at least annually, containing information on the fees and interest paid by the consumer on the account, as well as any interest earned in the previous year. Its purpose is to enable a consumer to understand what fee expenditure relates to and to assess the need to either modify consumption patterns or change PSPs. Like the FID, the SoF must use the EU standardised terminology. PSPs must also use this terminology in other contractual, commercial and marketing information.

The Competition and Consumer Protection Commission (“CCPC”) must operate a website that compares PSPs’ fees for at least the services included in the payment account services list. Each PSP must inform the CCPC of its relevant fees and notify the CCPC at least five working days before making any changes to those fees.

The provisions in the Payment Accounts Regulations on fee comparability will not enter into force until nine months after the entry into force of the delegated act containing the technical standards setting out the standardised terminology for services linked to a payment account and the standardised format and common symbol of both the FID and the SoF. The EBA is currently consulting on the draft technical standards and this consultation will close on 21 December 2016.

Account Switching

PAD seeks to promote account switching by establishing a quick, simple and safe procedure both when a consumer wishes to switch from one PSP to another and when he or she wishes to switch between different payment accounts within the same PSP.

The Payment Accounts Regulations require PSPs to comply with the Central Bank of Ireland’s Code of Conduct on the Switching of Payment Accounts with Payment Service Providers 2016 (the "Code") and to facilitate consumers who wish to close a payment account and open a payment account with a PSP located in another member state.

The Code replaces the Central Bank’s 2010 Code of Conduct on the Switching of Current Accounts, which covered some but not all of the requirements set out in the Payment Accounts Regulations and which only applied to credit institutions. For its part, the Code, which came into effect on 21 September 2016, applies to all PSPs when providing payment accounts to consumers in Ireland. Among other things, once the consumer contacts the PSP to which he or she intends to switch his or her payments and provides consent to the switch, the relevant PSP is responsible for:

• contacting the transferring (previous) PSP and asking it to transfer data and cancel standing orders; and
• setting up new standing orders and accepting direct debits.

The Code also requires each PSP to have a payment account switching pack available in each branch and on its website containing information specified in the Code, including on the switching process. The Payment Accounts Regulations specify that consumers must be told of the roles of the transferring and receiving PSPs for each step of the switching process, the timeframe for completion, the fees (if any), any information the consumer will be asked to provide and details of alternative dispute resolution procedures.

Fees charged in connection with a switching service must be reasonable and reflect the actual cost to the PSP of providing the service.

Access to Payment Accounts

In line with PAD, the Payment Accounts Regulations prohibit a “relevant credit institution” from discriminating against a consumer who is an EU resident including by reason of his or her nationality or place of residence when he or she applies for or accesses a payment account. In addition, it requires that all consumers who are legally resident in the EU must be able to access a payment account with basic features free of charge or for a reasonable fee. The conditions applicable to holding a payment account with basic features must not be discriminatory.

A relevant credit institution may refuse an application for access to a payment account with basic features where the consumer already holds a payment account with a relevant credit institution save where a consumer declares that he or she has received notice that the payment account will be closed. It may also refuse an application to avoid infringing the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. A relevant credit institution must either refuse an application or open an account without due delay and at the latest within 10 business days after receiving a complete application.

A payment account with basic features must enable the consumer to avail of the following services: opening, operating and closing accounts, placing funds, cash withdrawals at the counter or by ATM, direct debits, payment transactions through a payment card and credit transfers. However, a relevant credit institution need only offer these services to the extent that it already offers them to consumers holding other payment accounts.

The relevant credit institution must offer a payment account with basic features free of charge for the first 12 months at least. Thereafter, it may impose a reasonable fee, subject to compliance with certain conditions.

Comment

The Payment Accounts Regulations impose a number of new obligations on PSPs. The requirements relating to switching and access to payment accounts already apply. Once the delegated act on standardised terminology and standard form documents has entered into force, PSPs will have nine months in which to:

• produce two new account documents, namely a FID and a glossary, using the prescribed standardised terminology;
• review and re-format existing fee statements to ensure they employ the standardised terminology, comply with the new standard format and include all the information required under the Payment Account Regulations; and
• update documents, websites and other marketing tools to reflect the new standardised terminology.

Each PSP will also need to inform the CCPC of the fees that it charges for services included in the payment account services list and notify the CCPC in advance of any changes to those fees.