What is the Payment Services Directive?
The Payment Services Directive (PSD1) was first adopted in 2007 and became effective in Ireland and the UK in 2009.
This is a European Regulation which is given effect in all EU member states through local implementing legislation. The Payment Services Directive provides the legal foundation for an EU single market for payments.
The objective is to provide safer and more innovative payment services across the European Union by creating common rules for certain types of electronic payments such as card payments and online payments. The second Payment Services Directive (PSD2), which came into effect on the 13th of January 2018 simply evolves the rules set out in the PSD1.
What are the key points?:
• Facilitate a more integrated and efficient European Payments Market;
• Make payments safer and more secure and thus protect consumers against fraud, abuse and
payment problems;
• Promote innovative mobile and internet payment services; and
• Enhance consumer protection.
Aside from the general updates detailed above, there are some additional changes to note relating to PSD2 which affect merchants. The below summary highlights some of these changes and reflects acquiring Banks current operations:
Surcharging:
The practice of surcharging is common in certain EU Member States in particular in relation to online payments and across certain specific industries such as travel and ticketing industries. In all cases where card charges imposed on merchants are capped through the EU Interchange Fee Regulations, a merchant will not be allowed to charge more for accepting a payment card than they would charge for accepting cash (this rule also applies to certain other payment methods regulated by the EU SEPA Regulation). This rule applies to all consumer card transactions (in shops and online) made within the EU.
In Ireland, this means businesses are no longer permitted to charge customers extra (surcharging) for paying with a consumer credit or debit card. For example, it is it is no longer legal to apply a surcharge to consumer Visa or MasterCard payments.
In the UK, the rule has gone further by extending this prohibition to include a number of additional non-card based consumer payment instruments. This would include, for example, use of payment instruments issued for non-card payment methods such as PayPal.
These rules do not cover transactions made using commercial payment cards such as business or corporate credit cards. However, in these cases, while surcharging is technically permitted, the charge must be reasonable and must be consistent with the actual costs incurred in the transaction.
Customer Complaints:
PSD2 introduced certain specific requirements which must be followed in dealing with Customer complaints. The changes can be broken down into the following categories:
Responsiveness/turnaround times:
• Acquiring Banks are required to respond to a complaint from customers within 15 business days of receipt of the complaint. The response shall address all points raised in the complaint.
• In an exceptional situation, where Acquiring Banks are unable to comply with the above requirement, for reasons beyond control, Banks shall send a reply to customers clearly indicating the reasons for a delay in answering the complaint and specifying the deadline by which the customer will receive a reply. In this scenario Banks shall send a final reply to customers concerned, addressing all points raised in the complaint, at the latest within 35 business days of receipt of the original complaint.
The Medium of response:
• Acquiring Banks are required to respond to complaints on paper or using another durable medium (for example e-mail).
Appeals / Alternative Dispute Resolution (ADR)
• Acquiring Banks will provide, on request, details relating to the referral of a complaint to the Financial Services and Pensions Ombudsman (or other appropriate ADR entity). The Financial Services and Pensions Ombudsman has jurisdiction over the settlement of disputes between Banks and their customers which are consumers or micro-enterprises concerning rights and obligations arising from the PSD2.
Consumer Rights Information:
The European Commission have produced a useful summary/fact sheet about the Payment Services Directive and addressing Frequently Asked Questions. The fact sheet can be accessed here:
europa.eu/rapid/press-release_MEMO-15-5793_en.htm?locale=en