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Wednesday, 19 July 2017

Final UK Regulations Implementing #PSD2

The UK government has today announced its final approach to implementing the new Payment Services Directive (PSD2), along with the final version of the Payment Services Regulations 2017. A final assessment of the impact of the new regulations is yet to be published. The FCA is expected to finalise its guidance on its approach to supervising PSD2 - along with application forms and so on - by September, and to accept applications for authorisation/registration from October 2017 to meet the implementation deadline of 13 January 2018.

It turns out that the responses to the consultation in February have only persuaded the government to change a few aspects of its approach to implementation (explained below). But it seems from the summaries that many responses didn't account for the fact that the government's hands have been tied since 2015, when the UK agreed the final version of PSD2 at EU level. As it's a maximum harmonisation directive, member states can only depart from PSD2 where it specifically allows them to. The ship has sailed (albeit with some awkward passengers on board, as explained in my own response). For the most part, implementation is now a question of how the FCA interprets the language in its application to the real world, which it consulted on in April. This does not suggest any lack of 'sovereignty', just a failure to influence EU negotiations (assuming those affected took the opportunity to engage at that time).

Ban on surcharging

One area of departure from the government's initial plan is to prohibit retailers from charging customers any additional amount for using any type of payment method/instrument.

The original idea was only to ban surcharging for the use of cards covered by the Interchange Fee Regulation (as required under PSD2), as well as cross border bank transfers and direct debits in euros (under the Single Euro Payments Area regulations); and limit the surcharges for other payment methods to the direct cost borne by the retailer for making them available.

But the government has opted instead for a blanket ban on businesses surcharging consumers for using any type of payment method, on the basis that it: 
"will create a level playing field between payment instruments and create a much clearer picture for consumers in which they know the full price of the product/service they are purchasing upfront and [can be] confident that there will be no additional charges when they come to pay [with] any payment instrument they choose to use. A blanket ban will also be much easier to enforce than the current position in which merchants are able to pass on costs (but the consumer has no easy way of assessing what these are).
Meanwhile, the government says it will "assess the scale" of claims that interchange fees for card payments have been rising again.

PSD2 introduces a new “account information service” which basically involves providing information from one or more payment accounts held by the user with one or more other payment service providers.

Initially, the list of services the government said it believed might constitute account information services included some services of a much broader in nature:
"• price comparison and product identification services;
• income and expenditure analysis, including affordability and credit rating or credit worthiness assessments...
[and] might include accountancy or legal services, for example” (para 6.30)."
This provoked concern that the government's interpretation was too broad and overlooked the requirement that an account information service would need to be conducted by way of business in its own right, rather than merely as an ancillary part of a wider service. Examples of services that the government says that respondents were concerned about include: 
"banks’ corporate functions; price comparison websites; accountants; financial advisors; legal firms; and Credit Reference Agencies (CRAs). Many of these services are currently provided via a contractual relationship between service providers, users, and ASPSPs, often referred to as Third Party Mandates (TPMs)."
The government now confirms, however, that:
"many uses of these mandates are likely to be outside of the scope of the PSDII. Examples could include power of attorney, where the services are unlikely to be undertaken ‘in the course of business’."

In addition, the FCA has already suggested this narrower view, based on the 'business test' in its own consultation on how it proposes to supervise PSD2.

Next steps

The FCA is expected to finalise its guidance on its approach to supervising PSD2 - along with application forms and so on for the various types of authorisation/registration - by September, and to accept applications for authorisation/registration from October 2017.