The Suspicious Timing of The UK Government Review of The Consumer Credit Act

The UK government recently issued a brief press release promising a consultation "by the end of this year" on plans to review the Consumer Credit Act 1974 (CCA). I think you'll agree that the timing and lack of detail is more than a little suspicious.

The release spouts the usual guff about supposed Brexit benefits:

"Leaving the EU has provided additional opportunity for regulatory reform and the government will examine which parts of EU retained legislation can be repealed or replaced to ensure regulation is better suited to the needs of the British people." 

The Economic Secretary also claims that "The Consumer Credit Act has been in place for almost 50 years - and it needs to be reformed to keep pace with the modern world." 

It's a little disingenuous, then, for the press release not mention that the CCA and related regulations were extensively amended in 2010 to implement the EU Consumer Credit Directive of 2008 (CCD1).  

I mean, why pass up an opportunity to blame the EU for legislation you plan to 'reform' all on your own?

It's verging on suspicious that the press release also presents the UK government's review of the CCA as somehow politically independent and part of a more general review of "EU retained legislation" without so much as pointing a finger at the extensive process for reviewing CCD1, which began in 2014 before Brexit was even conceived and culminated in a report in 2020 before Brexit took effect. 

Suspicions are confirmed, however, when the press release makes no mention of the previous week's announcement by the Council of the EU, on 9 June 2022, that it had agreed its approach to a detailed proposal for a new consumer credit directive (CCD2). 

Perhaps the minister is unaware that the UK played a significant role in the development of CCD2? If so, it will come as an enormous surprise when it is revealed that the government has adopted the same approach in its next revision of the CCA, just as it did in 2010. 

But, hey, blue passports!

Low Take-Up Of UK Temporary Permissions Regime By EEA Firms With UK Passports?

According to the FCA's figures in August 2016, the end of financial services passporting between the EEA and the UK was going to leave 5,476 UK finance firms potentially needing a new passporting 'hub' in one of the remaining 27 EU countries and 8,008 EEA firms potentially needing a UK base to cover their UK offerings. So, how many have acted?

There has definitely been a scramble by UK firms to set up in the EU27, although the figures are spread across multiple registers, and regulators do not disclose the numbers of applications that are still in progress. The Central Bank of Ireland claimed "well over 100" in September 2019, for example, with similar numbers thrown out by others. 

Not all firms might use their passports, of course. It's quite straightforward to take advantage of the passporting regime - a simple notification to your home state regulator, which then notifies the various host state regulators. And there's no obligation to actually use a passport. Many firms will have ticked the box for all EEA countries to avoid inadvertently committing an offence wherever their customers happened to reside. And the picture is perhaps distorted by non-EEA corporations who were using the UK as their passport hub, so their new Irish subsidiary would not count as an application by a UK parent.

There has been less pressure on EEA firms who operate under passports in the UK because the FCA offered a Temporary Permissions Regime (TPR) that allows them to continue trading for 3 years as if they were passporting. The registration deadline has been extended each time Brexit has been delayed, so the current deadline is 30 January 2020. However, it's likely that most, if not all, EEA firms that were intending to use the TPR option will have already registered, although some newly authorised firms could still squeeze in (e.g. new FinTech firms).

At any rate, the Financial Conduct Authority has responded to a Freedom of Information Act request with the news that 1,441 EEA-based firms had applied for the TPR by October 2019. Of those, 228 are based in Ireland, 170 in France, 165 in Cyprus and 149 in Germany. 

If this is to be considered a high take-up of the TPR option, then it would appear that only about 18% of EEA passports into the UK were actually being used. That's perhaps not unreasonable, given the tick-box approach to passporting to avoid inadvertently committing an offence in the UK in the event that they ended up with UK customers.

In any event, these 1,441 firms now have until 30 January 2023 to decide whether to set up offices in the UK and get authorised locally, to the extent they continue to serve the UK market.

What Does Gov.uk Say You Need To Do Now To Prepare for Brexit?

Wow, I just plugged the data about my own professional service business into the UK Government's "Get Ready for Brexit Check" and set out below is what I got... 

As you read it, remember that free trade deals do not cover the export/import of services to anywhere near the extent that the UK trades in services under the principle of free movement of services as an EU member state. So, any form of Brexit effectively means "No Deal" for services.

All I can say is that I'm very relieved that I did my Brexit-proofing last year!

...

Based on your answers, we know:

• You own or operate a business or organisation
• You work in professional, legal and business services
• Your business sells goods or services in the UK
• Your business provides services in the EU
• You do not employ EU citizens
• You exchange personal data with EU organisations
• You process personal data from the EU
• You use websites or services hosted in the EU
• You provide digital services to the EU
• You use or rely on intellectual property protection
• You use or rely on IP copyright protection
• You do not receive EU or UK government funding
• You do not sell products or services to the public sector
• You are a British national
• You live in the UK
• You are employed in the UK
• You plan to travel to Ireland

Your business or organisation

Check if you need to change your conformity assessment or conformity marking to sell your CE marked goods in the UK or EU

In most cases you can continue using the CE marking in the EU and UK (although in some cases you may need to transfer your certificate of conformity to an EU conformity asssesment body) - but if your good requires UKCA marking and you have not used it, then it will not be valid for sale in the UK.

Read the guidance: Prepare to use the UKCA mark after Brexit

Do it as soon as possible

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Get legal advice if your business is merging with an EU company

If you do not follow the rules, you may be investigated by the Competition and Markets Authority (CMA) and the European Commission.

Read the guidance: Merger review and anti-competitive activity after Brexit

Do it as soon as possible

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Check if you need to appoint a representative in the EU, and label your goods with your EU importer's details

If you do not meet the requirements, you may not be able to export goods to the EU.

Read the guidance: Placing manufactured goods on the EU market after Brexit

Do it as soon as possible

---

Check if your employees need a visa or work permit and meet any requirements for their profession to work in the country they’re going to

You or your employees may not be able to enter or work in some countries.

Read the guidance: Providing services to any country in the EU, Iceland, Liechtenstein, Norway or Switzerland after Brexit

Do it as soon as possible

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Check if you need to change how you do accounting and reporting

You may breach reporting requirements in EEA countries if you do not make any changes you need to.

Read the guidance: Accounting if there's a no-deal Brexit

Do it as soon as possible

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Read the guidance from the Information Commissioner's Office (ICO) to check if you need to change your contract to keep accessing personal data from the EU

You will not be able to access personal data from the EU without the right contract.

Read the guidance: Using personal data in your business or organisation if there’s no Brexit deal

Do it as soon as possible

---

Check how to label food if you're selling it in the UK or EU

You may not be able to sell goods in the EU if they're labelled incorrectly.

Read the guidance: Food labelling changes if there's a no-deal Brexit

Do it as soon as possible

---

Check if you need to pay a tariff on goods you import from the EU

Your goods will be held at customs if you do not pay the correct tariff.

Read the guidance: Check temporary rates of customs duty (tariffs) on imports after a no-deal Brexit.

It takes more than 4 weeks

---

Sign up to search for contracts to sell goods or services to the UK public sector

You won't receive notifications of new UK public sector contract opportunities.

Read the guidance: Public-sector procurement after a no-deal Brexit

Do it as soon as possible

---

Check if you need to change your contracts to broadcast licenced content outside the UK

You may not be able to broadcast outside the UK if you do not get extra copyright permissions.

Read the guidance: Copyright if there's no Brexit deal

Do it as soon as possible

---

Check if you need permission to sell someone's intellectual property in the EEA, if you've already sold it in the UK

You may not be able to export your intellectual property protected products from the UK to the EEA without the right permission.

Read the guidance: Brexit and exhaustion of intellectual property rights

Do it as soon as possible

---

Appoint a representative in the EU if you run a large UK-based online business providing digital services in the EU

You may be fined if you do not have a representative to help you meet online security standards.

Read the guidance: NIS Regulations - what digital service providers in the UK should do if there’s no Brexit deal

Do it as soon as possible

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Exchange your UK Driver Certificate of Professional Competence (CPC) for an EU Driver CPC

You will not be able to drive a lorry, bus or coach for an EU operator if you do not have an EU Driver CPC.

Read the guidance: Driving in the EU after Brexit

Do it as soon as possible

---

Check how to get approval to sell vehicles and vehicle parts in the UK and the EU

You will not be able to sell vehicles or vehicle parts in the UK and the EU if they are not approved correctly.

Read the guidance: Vehicle type-approval if there’s no Brexit deal

It takes more than 4 weeks

---

Check what steps you need to take in order to import goods from the EU

If you do not get your business ready, you may not be able to import goods into the UK from EU countries.

Read the guidance: Get your business ready to import from the EU to the UK after Brexit

Do it as soon as possible

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Disclose your designs before 31 October if you want unregistered protection in the UK and EU

If you do not do this before 31 October, you’ll only have protection where you first showed your design, either the UK or the EU.

Read the guidance: Changes to registered design, design rights and international design and trade mark law if the UK leaves the EU without a deal

Do it as soon as possible

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Check what you need to do if you're a lawyer with an EU or EEA qualification to still work or provide legal services in the UK

You may not be able to continue working or providing legal services in the UK if you do not prepare.

Read the guidance: EU lawyers in the UK after a no-deal Brexit

Do it as soon as possible

---

Check what you need to do if you own a UK legal services business

You may not be able to continue providing legal services in the same way if you do not get your business ready.

Read the guidance: Legal services business owners after a no-deal Brexit

Do it as soon as possible

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Check what you need to do if you're a lawyer with a UK qualification to still work or provide legal services in the EU

You may not be able to continue working or providing legal services in the EU if you do not prepare.

Read the guidance: UK lawyers practising in the EU, Norway, Iceland or Liechtenstein in a no-deal Brexit

Do it as soon as possible

---

Check which carbon pricing policies you need to comply with before and after exit day

You may not comply correctly with emissions reporting and carbon pricing regulations, which could lead to a fine.

Read the guidance: Meeting climate change requirements if there’s no Brexit deal

Up to one week

---

Check if your employees need to make social security contributions in the UK as well as in the EU, EEA or Switzerland

Your employees may not be entitled to healthcare or benefits in the country they work in.

Read the guidance: Social security contributions for EU, EEA or Swiss workers

Do it as soon as possible

---

You may not need to do all these actions ahead of the 31 October deadline. The action you may need to take may change subject to negotiations and your own circumstances.

Is Your Financial Services Provider Ready For A #NoDeal Brexit?

With a 'No Deal' Brexit now central to Tory government strategy, it's critical to ensure the right financial contingency plans are in place for a 'cliff edge' exit with no transition period from 29 March 2019. Unfortunately, however, the European Banking Authority says it is seeing "little evidence of financial institutions communicating effectively to their customers on how they may be affected by the UK withdrawal" and those institutions' Brexit arrangements. So customers have to question their providers about those arrangements. Here's a quick guide to steps those institutions might take, depending on whether they are based in the UK or elsewhere in the EEA... if you do not receive credible, satisfactory commitments to service continuity from existing providers within the next few weeks, you should set-up alternative and/or back-up relationships as soon as possible.

EEA-based firms supplying services into the UK

These firms will have a short window ahead of Brexit day in which to seek temporary regulated status:

• temporary permission to continue operating in the UK for a limited period after Brexit if they currently passport into the UK under the Financial Services and Markets Act 2000 (FSMA) or the e-money or payment services regimes;
• temporary recognition if they are third country central counterparties; or
• temporary registration if they are EU-registered trade repositories. 

If EEA-based firms carry out operations in the UK after Brexit in reliance on EU legislation without entering into these temporary regimes, they may be carrying on regulated activities in the UK without appropriate permissions, which would be a criminal activity and/or mean they cannot meet their contractual obligations.

EEA firms that do not gain full authorisation through the temporary regimes can only continue to carry out new business to the extent necessary to 'run-off' pre-existing contractual obligations in the UK for five years (15 years for firms performing obligations under insurance contracts). They cannot undertake new business or agree new contracts with UK customers. A "supervised run-off" arrangement applies to those firms with a UK branch, firms who enter a temporaty regime but exit it without UK authorisation and firms that hold top-up permissions before Brexit. A "contractual run-off" regime will apply to firms without a UK branch that do not enter a temporary regime or do not hold a top-up permission; and will apply for the purposes of winding down UK regulated activities in an orderly manner.   Firms with a UK establishment will retain their existing membership of the Financial Services Compensation Scheme. 

A run-off regime for payments firms and e-money firms that do not enter the temporary regime or leave it without full UK authorisation will apply for five years, either on a supervised or contractual basis (though the FCA can require supervised run-off for firms to demonstrate they are safeguarding client funds). 

A run-off regime will apply for non-UK Central Counterparties that are eligible for, but do not enter, the temporary recognition regime, for a period of one year starting on exit day. If a non-UK CCP entered the temporary recognition regime but exits it without the necessary permanent recognition, the Bank of England will determine a non-extendable period for recognition up to a year. 

There will also be a run-off regime for trade repositories that are removed from the temporary registration regime without the necessary permissions to continue to provide services to UK firms, for a non-extendable period of one year, unless the FCA sets a shorter period. 

UK firms dealing with EEA residents

The FCA has suggested that UK financial services providers consider the following questions ahead of Brexit. If the answer is 'Yes' to any of them, then the service provider should understand the legal basis for that scenario and whether another basis is necessary after Brexit - including additional regulatory permissions or a new subsidiary with the right authorisation or agency and necessary permissions in a remaining EEA member state. 

• Do you currently provide any regulated products or services to customers resident in the EEA? For example, you might provide financial advice to EEA based customers. Or you might have insurance contracts either with EEA based customers or which cover risks located in the EEA which require regulatory permission in that country in order to be serviced. 
• Do you have customers or counterparties based in the EEA, including UK expatriates now based in an EEA country? 
• Are you marketing financial products in the EEA? This includes products marketed on a website aimed at consumers in the EEA. 
• Do you have agents in the EEA or interact with any intermediary service providers in the EEA? For example, you may use an insurance intermediary to distribute products into the EEA. 
• Does your firm transfer personal data between the UK and the EEA or vice versa? 
• Does your firm have membership of any market infrastructure (trading venues, clearing house, settlement facility) based in the EEA? 
• Are you part of a wider corporate group based in the EEA, or does your firm receive any funding from an entity in the EEA? 
• Do you outsource or delegate to an EEA firm or does an EEA firm outsource or delegate to you? 
• Are you party to legal contracts which refer to EU law? 

There will now be insufficient time for any provider to get a new authorisation in another EEA member state, and even setting up an agency relationship would be very tough to do within the next few months.

Firms should be informing clients about issues such as:

• the implications of Brexit on the specific services they provide and the implications for the relationship between the client and the firm;
• the actions taken by the firm to prevent or detect problems, including how they will deal with client inquiries, changes in competent authorities or protection under national compensation schemes;
• the implications of any corporate restructuring, including changes to contractual terms or contract transfers;
• other impact on contractual and/or statutory rights, including the right to terminate existing contracts and cancel new contracts, and any rights of recourse and how to pursue them. 

If you do not receive credible, satisfactory assurances of service continuity post-Brexit from existing providers within the next few weeks, you should set-up alternative and/or back-up relationships as soon as possible.

Brexit Spells End To Cross-Border Interchange Fee Caps

UK consumers will lose another layer of protection after Brexit when dealing with EEA-based suppliers, as the government will no longer cap interchange fees where either the merchant's acquirer or the payment card issuer is based outside the UK.  This follows the erosion of other consumer protection measures for UK consumers buying from suppliers in the remaining EEA countries.

The proposed changes to the UK Interchange Fee Regulations for Brexit purposes would take effect on 30 March or end December 2020 (depending on whether there is a Withdrawal Agreement and related transition period). Among other things, the proposed Regulations:

• Limit the scope of the Regs from the EEA to the UK to transactions that take place only within the UK (both the acquirer and the card issuer are located in the UK), so cross-border card payments between the UK and the EEA will no longer be within scope of either the UK or EU interchange fee regs (i.e. payments made within the UK will continue to have caps on interchange fees, while payments where either the acquirer or the card issuer is based outside the UK (including in the EEA) will no longer be subject to the caps); and

• Allow for regulations setting lower caps on UK debit and credit card transactions, and a maximum cap for UK debit card transactions.

Use It Or Lose It: The UK Temporary Permission (Passport) Regime

The UK's Financial Conduct Authority has told firms based elsewhere in the European Economic Area who rely on a 'passport' to offer their financial services in the UK to notify the FCA if they intend to use the UK "temporary permissions regime" (TPR). The Prudential Regulatory Authority has issued a similar direction to the banks and other firms it regulates.

Notifications to the FCA must be made by submitting the Temporary Permission Notification Form containing the necessary information via the FCA's "Connect" system between 7 January and 28 March 2019.

Firms that have not submitted a notification during that period will not be able to use the TPR.

The FCA told Parliament in 2016 that there are 8,008 EEA firms holding 23,532 passports covering their UK financial services offerings. 

Will Your UK-issued Card Still Work In The EEA After Brexit?

Some confusion arising around this question today. The answer is that it should not be an issue, based on how card acquiring really works.

The EU has been clear since 2016 that, regardless of which type of Brexit occurs, UK-based financial institutions will no longer benefit from the ability to 'passport' their services into the rest of the European Economic Area (Norway, Liechtenstein and Iceland also participate in the financial services passporting arrangements). This position was emphasised in the relevant EU 'preparedness notice' in February 2018.

In the payments space about 350 UK firms rely on outbound passports around the rest of the EEA, while 142 EEA-based firms passport into the UK, as the FCA explained to Parliamentary select committee in August 2016.

More recently, the UK has said it will give the EEA-based firms a three year transition period to figure out how to continue serving the UK market.

So, in the payments space, the 350 UK-based banks, e-money institutions and payment institutions who currently rely on passports have been setting up additional new entities based in one of the remaining EU27 countries, from which they will service their customers who are resident in the EEA (as have I, on a professional basis, as UK professional qualifications will also cease to be recognised for providing services in the EEA). 

So, when Brexit occurs, the current residents of other EEA countries will be offered payment cards and accounts from an EEA-based entity, rather than a UK one.

That is not to say that a UK resident travelling in the EEA will not be able to make a payment using their payment cards issued to them in the UK under the typical international card schemes (which actually don't base their definition of Europe according to EEA and non-EEA distinctions, anyway). 

So, EEA-based merchants/retailers will still be able to take payment via their EEA-based payment provider (known as a 'card acquirer' or 'merchant acquirer'); and the UK customer will pay their UK card issuer as usual. The card scheme operator will still net-off amounts owed between EEA and non-EEA based issuers and acquirers and they will settle the difference with the schemes. It's just that the UK issuer in this example will then be among the non-EEA group.

The Cost Of My Professional #Brexit Preparations - £9,000 in Year 1

Few politicians will talk about the plight of the UK's trade in services after Brexit, presumably because they don't understand how it works, much less care. Yet services represent 80% of the UK economy, while UK firms and individuals exported £245 billion in services in 2016. But the UK had an overall trade deficit of -£67 billion with the EU in 2017, because a surplus of £28 billion on trade in services (exporting more than we imported) was outweighed by a deficit of £95 billion on trade in goods. The affected service providers will be hoping for this insane project to stop, but in the meantime we must prepare for the worst, whatever that might be...

Services affected by Brexit include, say, a British architect designing a building for a German client; the Manchester hotel catering for Italian tourists; or the Edinburgh accountants advising a French exporter.

Financial services and other business services (legal, accounting, advertising, research and development, architectural, engineering and other professional and technical services) made up 52% of UK service exports to the EU. And, of course, many businesses in those categories supply services to each other. 

So, the fact that financial licences won't work across the EU after Brexit, for example, means UK finance firms are moving their EU-facing operations into a remaining EU27 country and serving the rest of Europe from those offices.

Similarly, the fact that my UK legal qualifications won't be recognised in the EU means that I'll need to set up an additional presence somewhere in the EU27 (Ireland, in my case) just to keep advising my financial services clients on their EU-facing operations.

So, for me personally, the cost of doing business as usual after Brexit is at least £9,000 in fees the first year, and £6,000 each year after that, excluding any travel and accommodation. That's a big investment to make on the assumption that local lawyers elsewhere in the EU27 don't simply take my EU-related work away from me. But it's also money that will be spent in Euros in Ireland and not in the UK. Ireland is the winner here.

But this is not just a sob story about financial institutions and their professional advisers. The British woman, based in France, who drives skiers from Geneva airport to Morzine in her UK minibus on her UK bus licence won't be able to do that anymore, either.  Courier firms are also horrified, not just about vehicle or driver licensing issues and the higher costs and complexity involved in the movement of goods, but also because they employ EU staff with language skills and other key knowledge who may simply want to leave. 

What hoteliers make of all this is anyone's guess, it seems, but PWC suggests the biggest problem will be the ability to recruit and retain staff with the right language skills and experience. Based on the impact on financial and other business services, perhaps the movement of EU-facing operations into the EU may also mean less need for UK management and staff to travel to EU offices.

Of course, a market should develop around the need for advice on how to prepare for the worst. But for that to happen, we need to be much clearer on the impact of Brexit on services in the first place.

EU Warns Firms To Act On Loss Of Financial Services Passports

The European Union has today warned financial services firms that rely on EU passports to make alternative arrangements ahead of Brexit. Separate warnings were made to ratings agencies, investment firms, insurers and reinsurers,  banks and payment services firms, auditors, providers of post-trade services (settlement and clearing), and asset management. Warnings were also issued to participants in other pan-EU licensing schemes.

This is nothing new, as explained previously, and many firms have already activated their plans to move EEA-facing operations into one of the 27 remaining EU member states.

The warning is timely, however, in case any firms are distracted by UK government "assurances" concerning potential free trade arrangements following previous EU warnings in December, which the UK government has conceded the EU is legally entitled to issue. 

Such deals do not usually deal very extensively with services, and 'most favoured nations' obligations in existing EU trade deals with third countries mean that it is very unlikely that the EU will wish to - or realistically be able to - set any kind of precedent in a deal with the UK.

The UK government's insistence on the leaving the single market and the customs union effectively rules out the UK remaining a member of the EEA (like Norway). That means the only alternative to Brexit is remaining a member of the EU.

Post-Brexit Outlook For Passported Financial Services

Well it's been a dismal six months watching the politicians shadow-box among themselves over what Brexit really means. There's no shared vision of the big picture, let alone any grip on the detail. What is clear, however, is that size matters in trade negotiations. So the larger trading partners like the EU will dictate their own terms in any deals. And while the application of logic seems to be prohibited in this 'post-truth' era, I intend to proceed on the basis that the UK will not even be a member of the EEA (or the Customs Union) - and that it certainly won't get a better trade deal with the EU than it has today. That means the only real job left for UK politicians is to figure out who gets pork-barrelled compensated by the UK taxpayer for being worse off for having to treat the EEA as a separate market (where they can't pass those costs onto their UK/EEA customers more).

While the car makers got in first, ejecting from the EU/EEA poses a very significant challenge, in particular, for the 5,476 of the UK firms relying on 336,421 'outbound' passports to avoid being authorised in every EEA member state. This works out at 61 passports per firm, which is somewhat strange given there are 31 EEA countries, but passports are counted for each separate directive that requires them (only one if a firm has several under the same directive). Brexit is also a challenge for the 8,008 EEA firms that hold 23,532 passports (about 3 each) to cover their UK offerings.

In essence, a total of 13,484 firms need to apply for 359,953 additional regulatory permissions over the next two years if they want to continue to make sure they can cover their existing markets.

Such applications don't come cheaply or quickly, and involve significant ongoing management and administration costs following authorisation. And because most of the work will be required abroad, the lion's share of the related fees and expenses will be charged outside the UK, worsening the UK's trade deficit even further. The UK can also kiss goodbye to the tax revenues on the earnings of each foreign firm, as well as the incomes of its management and staff...

But that's all water under the bridge (or out the English Channel, if you will).

During the next two years, any financial services firm based in the UK/EEA that relies on a passport for cross-border activities or ambitions involving the UK will need to pursue the following options, either organically or by acquisition: 

• Retain/obtain authorization for an entity established in the UK, if it wishes to serve the UK market;

• Obtain/retain authorization for an EEA-based entity to take advantage of the EEA passport regime for the remaining EEA countries;

• Seek to rely on any passporting arrangements that the UK may agree with non-EEA countries (these could only be formally agreed post-Brexit, but might be planned in the meantime);

• Obtain/retain authorisations in any non-EEA countries it wishes to target - as is the case today, but the cost/benefit of targeting some of these countries may now have changed, given the extra cost of authorisation to serve EEA markets, and perhaps jockeying among countries wishing to take advantage of the situation.

So where would you base your EEA-passport firm?

The relevant analysis, if not the outcome, will vary significantly depending on the type of financial services and markets involved. Most of the relevant passports relate to general insurance intermediation and trade in various securities/markets, but payment and e-money services represent the third most popular category with perhaps greater retail significance - here 350 UK firms rely on outbound passports and 142 EEA firms passport into the UK.  According to a report commissioned by the Emerging Payments Association, the 350 UK firms have six countries to choose from as a potential base for their EEA passport entity, based on criteria including the ease of making an application, supportive regulatory approach/attitude, ease of setting up and doing business, jurisdictional reputation and sovereign/political risk:

• Cyprus 
• Denmark 
• Ireland 
• Luxembourg 
• Malta 
• Sweden

While not wishing to disparage any of those fine jurisdictions, you will see from the commentary in the EPA report why the UK is walking away from a (literally) golden opportunity to continue its role as the preferred EEA passporting hub for financial firms (many of which are managed or staffed by people who moved to the UK for that reason).  Yet, while that commentary is very helpful and a useful lens through which to view options, I know from personal experience that it does not always reflect reality on the ground or capture all the criteria that are relevant to the decision for each firm - and the authors don't pretend that it does.

We are only at the beginning of a very long and expensive journey...

Are Your Payment Accounts Caught By The Payment Accounts Regulations?

If you offer any type of "payment account" covered by the Payment Services Regulations, then the time has come to assess whether any of those fall within the scope of the Payment Accounts Regulations 2015 (“PARs”). From 18 September 2016, affected accounts will be covered by provisions relating to switching; accounts with basic features; and packaged accounts.

In its recent consultation paper, the FCA has said it expects firms to:

• make (and record) an initial assessment of the potential application of the PARs;

• put processes in place to make ongoing assessments for every new account introduced or changes to the functionalities of accounts are introduced; and

• revisit the issue regularly in case consumers are using the accounts differently or any other relevant factors change.

Unfortunately this is not an easy process. In particular, not all “payment accounts” under the Payment Services Regulations (which include e-money accounts) will necessarily fall within the scope of the PARs, as the definitions are different. This has caused uncertainty as to the scope of the PARs which the FCA has tried to put  right in the consultation paper (see Appendix 2).

The FCA has also offered guidance on what constitutes "packaged accounts" and what information must be given to consumers in relation to those under regulation 13 of the PARs (see Appendix 3).

Payment accounts providers must either participate in a designated switching service or provide one that meets certain minimum requirements in the PARs. There is a separate consultation by the Payment Services Regulator on the designation and monitoring of alternative switching services.

And finally, a little something for those preoccupied by Brexit.

As mentioned in July 2015, the PARs import the provisions of the EU Payment Accounts Directive ("PAD") but, as the FCA has stressed in its consultation paper, the UK created its own complexity and red tape in this scenario - choosing to 'gold-plate' EU law by copying it into UK laws that are interpreted literally, rather than reflecting the purposive interpretation that civil law member states adopt:

"In line with the Government’s default approach to implementing EU directives, the provisions of PAD have been copied out into the regulations as far as this is possible.... " (at para 1.12)

Whichever side of the Brexit debate you're on, if any, it's worth realising that Brussels is not always to blame!