European Union: The ECB Seeks To Harmonise And Bring Clarity To PSD2

Last Updated: 22 April 2014
Article by Clare Burman and John Worthy

On 5 February 2014, the European Central Bank ('ECB') published its opinion on the proposal for a directive on payment services in the internal market (COM (2013) 547/3) ('PSD2'), following a request from the Council that it examine the draft text of the legislation. In this article, John Worthy and Clare Burman of Field Fisher Waterhouse LLP consider the ECB's comments and how they are likely to impact on the final text of PSD2.

Role and opinion of the ECB

Among its many roles, the ECB is tasked1 with promoting the smooth operation of payment systems in the EU and is permitted2 to be involved in the legislative process by giving opinions on draft EU and national legislation which is of relevance to the European System of Central Banks ('ESCB'). As such, it is understandable that the Council would seek the ECB's opinion on the draft text of PSD2.

The ECB is broadly supportive of the objectives and contents of the proposed directive and makes some useful suggestions to clarify the Commission's (sometimes flowery and confusing) drafting.

Broadly, three main themes run through its proposals: addressing administrative/house-keeping aspects of the proposed directive; enhancing consumer protection and security; and ensuring harmonisation – internally within the proposed directive, with other European legislation, and between the Member States. Taking these in turn:

Administrative proposals

Many of the ECB's proposals, such as tidying up the definitions in the proposed directive, or adding Europol as one of the additional authorities with whom competent authorities can exchange information (Article 12(1)) are unlikely to be controversial and have also been suggested by others (see below). The ECB has also suggested that the existing system for sharing information between competent authorities and others could be improved by making the European Banking Authority ('EBA') responsible for coordinating information sharing, with the ECB notifying the ESCB as regards issues relevant to payment systems and payment instruments (Article 85).

Harmonisation

The ECB's opinion flags some inconsistencies within the proposed directive. It suggests, for example, creating a coherent compensation policy by aligning the financial compensation to be paid by third party service providers ('TPPs') to the account servicing PSP following an unauthorised transaction (Articles 65 and 82) with that which would be available for non-execution, defective or late execution. The ECB also notes that the services offered by a TPP which issues cards and one which uses payment account information are not essentially different, so proposed rules relating to access to, and the use of, payment account information ought to be merged to ensure consistency.

Many of the ECB's comments are mindful of the wider SEPA project. For example, it suggests that consumers using payment initiation services should enjoy the same level of protection that debtors already enjoy under SEPA and be able to instruct their provider to establish specific positive or negative lists of TPPs (new Article 59a). Similarly, it argues that Recital 57 and Article 67(1) proposed by the Commission, far from strengthening consumer protection, would prevent consumers from benefiting from the unlimited refund rights under the current SEPA direct debit scheme, and may also be so unwieldy as to be unworkable. It suggests instead introducing an unconditional refund right on all consumer direct debits for a period of eight weeks, with scope for opting out where goods or services are meant for immediate consumption. Finally, several of the ECB's proposals seek to reduce the scope for Member States to apply different interpretations of PSD2. To that end, the ECB has recommended removing Member States' discretion regarding national payments transactions (Articles 35(2) and 56(2)) and recommended that the EBA should develop common guidelines on complaint procedures for competent authorities (Article 89).

Consumer protection and security

Security is a theme that the ECB is developing more broadly, having also published its 'Assessment Guide for the Security of Internet Payments' in February 2014.

The ECB notes that the core principle of IT security is that credentials used to authenticate the payment service user are not shared with any third party. To that end, it strongly advocates the use of a strong customer authentication system by TPPs, via a standardised European interface for payment account access, based on an open European standard which will allow any TPP to access payment accounts throughout the EU. While the ECB's opinion lists certain minimum criteria for such a system, aimed at protecting account holders' data, and suggests that the detail should be defined by the European Banking Authority in consultation with the ECB, it also recommends that the main aspects (including a liability regime) ought to be clarified in the proposed directive.

In addition to its proposals (see above) to ensure consistent protection of consumers, the ECB is keen to ensure that safeguarding obligations are extended. It recommends that there should be a consistent obligation to safeguard in Article 9(1) and it should be irrelevant whether the payment institution is engaged in other business activities or not.

In one particular area though the ECB's enthusiasm for consumer protection seems likely to result in practical difficulties for the payments industry: the ECB (like ECON – see below) recommends that Title IV of the proposed directive should apply to payment services in any currency and also (aside from Articles 72 and 74(1)) apply to so-called 'one-leg' transactions. This will need more thought: as an example, Article 69 requires Member States to ensure that a payment order is deemed to be received when the payment order is received by the payer's PSP. The ECB does not elucidate what it expects will (or should) happen where the payer's PSP is outside the EU and a different time for receipt may be deemed under local law.

One voice among many

The ECB's opinion is just one of a plethora that have been generated by European institutions, as PSD2 is currently being reviewed by both the European Parliament and also by the Council of the EU, which represents the EU's Member States. This parallel process has resulted in recommendations being made:

  • to the European Commission by the European Data Protection Supervisor on 5 December 2013 and by the Commission's European Economic and Social Committee on 11 December 2013; and
  • to the European Parliament by its Committee on Legal Affairs for the Committee on Economic and Monetary Affairs on 18 December 2013 and its Committee on Economic and Monetary Affairs ('ECON'), in a report adopted on 20 February 2014.

Each entity has focussed on different angles, although there has been little comment on the proposed exemptions from PSD2, which is perhaps surprising given the concerns within the industry as to the lack of clarity in this regard. However, collectively, they have made a wealth of suggestions: the ECON report alone contains nearly 600 proposed amendments, many of which are similar or identical to those recommended by the ECB3, but the majority of which differ in approach or go beyond the areas commented upon by the ECB.

What next?

The European Parliament considered ECON's report and voted on 3rd April 2014 to adopt its recommendations; it is now for the Commission, the Council and the Parliament to agree on a final text for PSD2.

Although the aim has always been for PSD2 to be agreed during 2014, this will be a challenging timeline and PSD2 cannot, of course, be seen in isolation - it is part of the Commission's 'payments legislative package' and will need to be agreed in parallel with the proposed Regulation on Interchange Fees, the NIS Directive and updated data protection rules. With elections to the European Parliament looming on 22 - 25 May and the subsequent reconstitution of the Commission on 1 November, the Parliament, the Council and the Commission have a relatively narrow window within which to address the many concerns voiced by industry and bodies such as the ECB and to agree the final text of PSD2 and the other legislation in the payments package. The European Parliament's decision on 3rd April to consolidate the work done so far and hand it over to the next Parliament (which ensures that the newly elected MEPs can decide to build on the work already done rather than starting from scratch) is a pragmatic and necessary response designed to maintain the legislative momentum.

Closing thoughts

While the eagerness for legislative change is commendable, it would perhaps be better for the legislators to reach a considered agreement on the payments package, taking into account the advice supplied by experts such as the ECB and the European Data Protection Supervisor, rather than rushing the process and losing the opportunity to create a coherent suite of payments legislation. A delay to 2015 could result in legislation worth waiting for.

In the meantime, we must wait to see the degree to which the ECB's opinion carries weight with the legislators and is taken into account in the agreed text of PSD2.

 Footnotes

1. See Article 127(2) of the Treaty of the Functioning of the EU ('TFEU') and Articles 3 and 22 of the Statute of the European System of Central Banks ('ESCB') and of the ECB.

2. Article 282.5 of the TFEU.

3. Such as changes to certain definitions, the extension of most of Title IV to one-leg transactions, Europol becoming an additional authority, and various improvements to security features.

A version of this article first appeared in E-Finance& Payments Law & Policy - March 2014

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions