New legal framework (NLF) for payments
The purpose of this Directive is to establish a harmonised legal framework for payment services. It thus replaces the existing national rules in the 27 Member States by a set of provisions applying throughout the single market.
Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC [See amending act(s)].
This Directive aims to establish the legal framework necessary for the creation of an integrated payments market which would abolish barriers to the entry of new providers. It is also designed to enhance competition and provide users with more choice. Lastly, a high level of protection is guaranteed thanks to information requirements and the definition of the rights and obligations of the users and providers of payment services.
This Directive is addressed to payment services providers established within the Community and covers payments made in Euros or other national currencies of the European Union (EU). However, it does not apply to payment operations completed in cash or by cheque and regulates the granting of credit by payment institutions only where it is closely linked to payment services.
The Directive distinguishes six categories of providers of payment services:
- credit institutions (within the meaning of the Directive on the pursuit of the business of credit institutions), including branches, credit institutions which have their offices in the EU or outside of the EU;
- post-office giro institutions which provide payment services;
- electronic money institutions (within the meaning of the Directive on the pursuit and prudential supervision of the business of electronic money institutions);
- payment institutions (natural or legal persons who have been granted authorisation);
- the European Central Bank and national central banks when not acting in their capacity as monetary authority or other public authorities;
- Member States or their regional or local authorities when not acting in their capacity as public authorities.
Conditions for obtaining authorisation
Access to the business of providing payment services is subject to prior authorisation. Authorisation must be sought from the appropriate authorities of the home Member State and is granted only to legal persons established in a Member State. Applications must be accompanied by detailed information on: the applicant's programme of operations, business plan, administrative and accounting procedures, internal control mechanisms, risk management procedures, structural organisation, etc.
To obtain an authorisation, a payment institution must have robust governance arrangements. Moreover, the competent authorities may reject an application if they are not satisfied as to the suitability of the shareholders or members that have qualifying holdings.
The Directive stipulates that payment institutions must, at the time of authorisation, hold a certain amount of initial capital, depending on the payment service the institution provides, and at any time have sufficient own funds.
Once it has obtained an authorisation, a payment institution will be able to provide payment services throughout the EU, either under the freedom to provide services or under the freedom of establishment. Reasons must be given for any withdrawal of an authorisation, those concerned must be informed accordingly, and the withdrawal of an authorisation must be made public.
Authorisation as a payment institution will be valid in all Member States and recorded in a Community register which will be regularly updated and accessible online.
Member States must designate the competent authorities responsible for monitoring payment institutions. These must be public authorities, or bodies recognised by national law or by public authorities expressly empowered for that purpose, and must be independent of economic bodies. The competent authorities must cooperate with each other and are bound by the obligation of professional secrecy.
Among other things they are entitled to require a payment institution to provide any information needed for monitoring compliance, to issue recommendations, guidelines and binding administrative provisions, to suspend or withdraw authorisations and to impose penalties on payment institutions.
Transparency and information requirements
The Directive introduces clear and succinct information requirements for all service providers, whether in single payment transactions or those covered by a framework contract (involving a series of payment transactions).
More specifically, it lays down:
- conditions to be communicated in advance (obligations and liabilities of the service provider and the user, fees, information on the law applicable, indication of the complaint and redress procedures, etc.);
- information to be supplied at the request of the user prior to the execution of a payment transaction, in the case of a framework contract only (execution time, commissions, fees and charges);
- information to be made available to the payer after execution of a payment transaction (reference of the payment transaction and of the payee, total amount and amount of fees and commissions, exchange rate applied);
- information to be made available to the payee after the funds have been received (reference of the payer, full amount of the funds transferred and of the fees and commissions applied and the exchange rate).
Rights and obligations of users and providers of payment services
The Directive lays down rules on the rights and obligations of the users and providers of payment services, including:
- an execution time of one working day: if the payment is executed either in Euros, or in the currency of a Member State outside of the Euro zone and if the payment involves only one conversion between the Euro and the official currency of the Member State which is not part of the Euro zone, the amount of the payment order must be credited to the payee’s payment account at the latest at the end of the first working day following acceptance. During a transitional period up to 1 January 2012, the payer and the payment service provider may fix a different period provided it is not more than three days;
- liability of a payment service provider in case of non-execution or defective execution of a payment transaction: full liability is imposed on the provider if the transaction is carried out within the EU;
- liability of the user of payment services in the event of fraudulent use of a payment instrument (limited to EUR 150); however, this rule does not apply to corporate users;
- introduction of the full amount principle, according to which the full amount specified in a payment order must be credited to the beneficiary without any deductions;
- the conditions for refunding when a payment transaction has been wrongly authorised;
- the conditions of revocability, under which a user of payment services may refuse a payment wrongly assigned to him/her; it is also for the payment service provider to prove that the payment transaction was authenticated, accurately recorded, entered in the accounts and not affected by a technical malfunction.
|Act||Entry into force||Deadline for transposition in the Member States||Official Journal|
OJ L 319, 5.12.2007
|Amending Act(s)||Entry into force||Deadline for transposition in the Member States||Official Journal|
OJ L 302 of 17.11.2009