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knowledge 20 September 2019 |

SEPA’s Allergy to Residence Requirements

According to a recent judgment by the Court of Justice of the European Union (“CJEU”), a company that allows its customers to use direct debit under the Single Euro Payments Area (“SEPA”) as a payment method, cannot discriminate on the basis of residence when doing so.

The judgment arose out of a case against Deutsche Bahn brought by the Verein für Konsumenteninformation (“VKI”), an Austrian consumer protection association, in the Austrian courts. 

Deutsche Bahn offered consumers the possibility to book international train journeys on its website. For that purpose Deutsche Bahn concluded contracts with consumers on the basis of its general conditions of carriage, which contained a clause prohibiting payments for bookings made on Deutsche Bahn’s website by way of SEPA direct debit unless the customer was German resident (the “Clause”). Non-German resident customers had the option of paying by other means.

The VKI sought to have Deutsche Bahn ordered to cease using that clause in consumer contracts and, in support of its action, claimed that the Clause was contrary to Article 9(2) of Regulation 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro. Article 9(2) provides as follows:

A payee accepting a credit transfer or using a direct debit to collect funds from a payer holding a payment account located within the Union shall not specify the Member State in which that payment account is to be located, provided that the payment account is reachable in accordance with Article 3.

The Austrian Supreme Court referred a question to the CJEU regarding the interpretation of Article 9(2). 

In its judgment, the CJEU observed that Article 9(2)’s objective is to prevent business rules from preventing consumers from making payments, within the context of an integrated market for electronic payments in euros, to accounts held by payees with PSPs located in other Member States. While Article 9(2) does not explicitly prohibit requirements relating to a payer’s place of residence, the Clause was liable to undermine that objective, since it prevents payers from being able to make a direct debit from an account located in the Member State of their choice. 

According to the CJEU, the fact that non-German resident ticket purchasers could use alternative methods of payments was irrelevant, stating:

Although payees remain free either to offer payers the possibility of making payments by SEPA direct debit or not, by contrast, contrary to what Deutsche Bahn maintains, when they do offer such a possibility, those payees may not subject the use of that payment method to conditions which undermine the practical effects of Article 9(2) of Regulation No 260/2012.

Comment

In some respects, the CJEU’s judgment is hardly surprising, given what Advocate General Szpunar described, in his Opinion on the case as the universally acknowledged truth “that the fundamental freedoms which make up the internal market are allergic to residence requirements”.

However, following on from the CJEU’s judgment, it is clear that while companies continue to have a choice as to whether or not they will allow customers to use SEPA direct debits as a means of payment, if they do allow such payments, they cannot restrict this payment option to customers resident in a particular Member State.

You can access Case C-28/18 Verein für Konsumenteninformation v Deutsche Bahn AG here.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.