The European Union’s Payment Services Directive
(PSD) is on the verge of becoming a UK law on 2 March 2009. The
government has informally and formally consulted a wide variety of
stakeholders on the directive since it was proposed by the European
Commission in December 2005.
The implementation has been scheduled early in
order to allow firms to prepare for compliance. Guidance on the PSD
compliance for businesses is pending from the Financial Services
The aim underlying the directive introduces
EU-wide conduct of business rules. It was adopted by the European
Parliament in 2007 to achieve a single market for retail payment
services, increasing consumer protection and developing a
pan-European infrastructure for payments, credit transfers, direct
debits and card payments. Under the new system, stakeholders like
banks and card issuers will automatically be able to operate across
the EU, after gaining authorisation in any one member state.
To achieve these aims the PSD is introducing a
prudential authorisation regime which will affect all domestic,
sterling, euro and other non-euro EU currency payments. Small UK
firms will need to register with the FSA and comply with the
pertinent anti-money laundering requirements, but will be unable to
passport to other countries.
The directive also stipulates the information
that providers must provide to customers before, during and after a
transaction is made, for example, when the payment will reach the
recipient, the exchange rate and charges for any currency
conversions prior to initiation. It also introduces a maximum
one-month notice period for customers to be able to terminate a
payment service contract, with no charges allowed for terminating a
contract after 12 months.
The Treasury’s financial services secretary,
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.”