LeX-Ray

The creation of an integrated market for electronic payments in euro, with no distinction between national and cross-border payments is necessary for the proper functioning of the internal market. To that end, the single euro payments area (SEPA) project aims to develop common Union-wide payment services to replace current national payment services. As a result of the introduction of open, common payment standards, rules and practices, and through integrated payment processing, SEPA should provide Union citizens and businesses with secure, competitively priced, user-friendly, and reliable payment services in euro. This should apply to SEPA payments within and across national boundaries under the same basic conditions and in accordance with the same rights and obligations, regardless of location within the Union. SEPA should be completed in a way that facilitates access for new market entrants and the development of new products, and creates favourable conditions for increased competition in payment services and for the unhindered development and swift, Union-wide implementation of innovations relating to payments. Consequently, improved economies of scale, increased operating efficiency and strengthened competition should lead to downward price pressure in electronic payment services in euro on a ‘best-of-breed’ basis. The effects of this should be significant, in particular in Member States where payments are relatively expensive compared to other Member States. The transition to SEPA should therefore not be accompanied by overall price increases for payment service users (PSUs) in general and for consumers in particular. Instead, where the PSU is a consumer, the principle of not levying higher charges should be encouraged. The Commission will continue to monitor price developments in the payment sector and is invited to provide an annual analysis thereof.

The success of SEPA is very important economically and politically. SEPA is fully in line with the Europe 2020 strategy which aims at a smarter economy in which prosperity results from innovation and from the more efficient use of available resources. Both the European Parliament, through its resolutions of 12 March 2009 ( 4 ) and of 10 March 2010 ( 5 ) on the implementation of SEPA, and the Council in its conclusions adopted on 2 December 2009, have underlined the importance of achieving rapid migration to SEPA.

PSD of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market ( 6 ) provides a modern legal foundation for the creation of an internal market for payments, of which SEPA is a fundamental element.

CBPICR of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community ( 7 ) also provides a number of facilitating measures for the success of SEPA such as the extension of the principle of equal charges to cross-border direct debits and reachability for direct debits.

Self-regulatory efforts of the European banking sector through the SEPA initiative have not proven sufficient to drive forward concerted migration to Union-wide schemes for credit transfers and direct debits on both the supply and the demand side. In particular, consumer and other user interests have not been taken into account in a sufficient and transparent way. The voice of all relevant stakeholders should be heard. Moreover, that self-regulatory process has not been subject to appropriate governance mechanisms, which may partly explain the slow uptake on the demand side. While the recent establishment of the SEPA Council represents a significant improvement of the governance of the SEPA project, fundamentally and formally governance still remains very much in the hands of the European Payments Council (EPC). The Commission should therefore review the governance arrangements of the whole SEPA project before the end of 2012 and, where necessary, make a proposal. That review should examine, inter alia, the composition of the EPC, the interaction between the EPC and an overarching governance structure, such as the SEPA Council, and the role of that overarching structure.

Only rapid and comprehensive migration to Union-wide credit transfers and direct debits will generate the full benefits of an integrated payments market, so that the high costs of running both ‘legacy’ and SEPA products in parallel can be eliminated. Rules should therefore be laid down to cover the execution of all credit transfer and direct debit transactions denominated in euro within the Union. However, card transactions should not be covered at this stage, since common standards for Union card payments are still under development. Money remittance, internally processed payments, large-value payment transactions, payments between payment service providers (PSPs) for their own account and payments via mobile phone or any other means of telecommunication or digital or IT device should not fall within the scope of those rules since those payment services are not comparable to credit transfers or direct debits. Where a payment card at the point of sale or some other device such as a mobile phone is used as the means to initiate a payment transaction, either at the point of sale or remotely, which directly results in a credit transfer or a direct debit to and from a payment account identified by the existing national basic bank account number (BBAN) or the international bank account number (IBAN), that payment transaction should, however, be included. In addition, given the specific characteristics of payments processed through large-value payment systems, namely their high priority, urgency, and primarily large amount, it is not appropriate to cover such payments under this Regulation. That exclusion should not include direct debit payments, unless the payer has explicitly requested the payment be routed via a large-value payment system.

Several payment services currently exist, mostly for payments through the internet, which also use IBAN and the business identifier code (BIC) and are based on credit transfers or direct debits but have additional features. Those services are expected to extend beyond their current national borders and could fulfil a consumer demand for innovative, safe and cheap payment services. In order not to foreclose such services from the market, the regulation of the end-dates for credit transfers and direct debits provided for in this Regulation should apply only to the credit transfer or direct debit underlying those transactions.

In the vast majority of payment transactions in the Union, it is possible to identify a unique payment account using only IBAN without additionally specifying BIC. Reflecting this reality, banks in a number of Member States have already established a directory, database or other technical means to identify the BIC corresponding to a specific IBAN. BIC is required only in a very small, residual number of cases. It seems unjustified and excessively burdensome to oblige all payers and payees throughout the Union always to provide BIC in addition to IBAN for the small number of cases where this is currently necessary. A much simpler approach would be for PSPs and other parties to solve and eliminate those cases where a payment account cannot be identified unambiguously by a given IBAN. Therefore the necessary technical means should be developed to enable all users to identify unambiguously a payment account by IBAN alone.

For a credit transfer to be executed, the payee’s payment account must be reachable. Therefore, in order to encourage the successful take-up of Union-wide credit transfer and direct debit services, a reachability obligation should be established across the Union. To improve transparency, it is furthermore appropriate to consolidate that obligation and the reachability obligation for direct debits already established under CBPICR in a single act. All payee payment accounts reachable for a national credit transfer should also be reachable via a Union-wide credit transfer scheme. All payers’ payment accounts reachable for a national direct debit should also be reachable via a Union-wide direct debit scheme. This should apply whether or not a PSP decides to participate in a particular credit transfer or direct debit scheme.

Technical interoperability is a prerequisite for competition. In order to create an integrated market for electronic payments systems in euro, it is essential that the processing of credit transfers and direct debits is not hindered by business rules or technical obstacles such as compulsory adherence to more than one system for settling cross-border payments. Credit transfers and direct debits should be carried out under a scheme, the basic rules of which are adhered to by PSPs representing a majority of PSPs within a majority of the Member States and constituting a majority of PSPs within the Union, and which are the same both for cross-border and for purely national credit transfer and direct debit transactions. Where there is more than one payment system for the processing of such payments, those payment systems should be interoperable through the use of Union-wide and international standards so that all PSUs and all PSPs can enjoy the benefits of seamless retail euro payments across the Union.

Given the specific characteristics of the business market, whilst business-to-business credit transfer or direct debit schemes need to comply with all other provisions in this Regulation, including having the same rules for cross-border and national transactions, the requirement that participants represent a majority of PSPs within the majority of Member States should apply only to the extent that PSPs providing business-to-business credit transfer or direct debit services represent a majority of PSPs in the majority of Member States where such services are available, and constitute a majority of PSPs providing such services within the Union.

It is crucial to identify technical requirements unambiguously determining the features which Union-wide payment schemes to be developed under appropriate governance arrangements have to respect in order to ensure interoperability between payment systems. Such technical requirements should not restrict flexibility and innovation but should be open to and neutral towards potential new developments and improvements in the payments market. Technical requirements should be designed taking into account the special characteristics of credit transfers and direct debits, in particular with regard to the data elements contained in the payment message.

It is important to take measures to strengthen the confidence of PSUs in the use of such services, especially for direct debits. Such measures should allow payers to instruct their PSPs to limit direct debit collection to a certain amount or a certain periodicity and to establish specific positive or negative lists of payees. Within the framework of the establishment of Union-wide direct debit schemes, it is appropriate that consumers are able to benefit from such checks. Nevertheless for the practical implementation of such checks on payees, it is important that PSPs are able to check on the basis of IBAN, and, for a transitional period, but only where necessary, BIC, or some other unique creditor identifier of specified payees. Other relevant rights of users are already established in PSD and should be fully ensured.

Technical standardisation is a cornerstone for the integration of networks, such as the Union payments market. The use of standards developed by international or European standardisation bodies should be mandatory as from a given date for all relevant transactions. In the payment context, such mandatory standards are IBAN, BIC, and the financial services messaging standard ‘ISO 20022 XML’. The use of those standards by all PSPs is therefore a requirement for full interoperability throughout the Union. In particular, the mandatory use of IBAN and BIC where necessary should be promoted through comprehensive communication and facilitating measures in Member States in order to allow a smooth and easy transition to Union-wide credit transfers and direct debits, in particular for consumers. PSPs should be able to agree, bilaterally or multilaterally, on the expansion of the basic Latin character set to support regional variations of SEPA standard messages.

It is absolutely crucial that all actors, and particularly Union citizens, are properly informed, in a timely manner, so that they are fully prepared for the changes brought about by SEPA. Key stakeholders such as PSPs, public administrations and national central banks as well as other heavy users of regular payments should therefore carry out specific and extensive information campaigns, proportionate to the need and tailored to their audience as may be necessary, in order to raise public awareness and prepare citizens for SEPA migration. In particular, there is a need to familiarise citizens with migration from BBAN to IBAN. National SEPA coordination committees are best placed to coordinate such information campaigns.

In order to allow a concerted transition process in the interests of clarity and simplicity for consumers, it is appropriate to set a single migration deadline by which all credit transfers and direct debit transactions should comply with those technical requirements, while leaving the market open for further development and innovation.

For a transitional period, Member States should be able to permit PSPs to allow consumers to continue using BBAN for national payment transactions on condition that interoperability is ensured by converting BBAN technically and securely into the respective unique payment account identifier by the PSP concerned. The PSP should not levy any direct or indirect charges or other fees linked to that service.

Although the level of development of credit transfer and direct debit services differs from one Member State to another, a common deadline at the end of an adequate period for implementation, which allows for all the necessary processes to take place would contribute to a coordinated, coherent and integrated migration to SEPA and would help prevent a two-speed SEPA, which would cause greater confusion among consumers.

PSPs and PSUs should have sufficient time to adapt to the technical requirements. However, the adaptation period should not unnecessarily delay the benefits to consumers or penalise the efforts of proactive operators that have already moved towards SEPA. For national payment and cross-border payment transactions, the PSPs should provide their retail customers with the necessary technical services in order to ensure a smooth and secure conversion to the technical requirements laid down in this Regulation.

It is important to provide legal certainty to the payments industry on business models for direct debits. Regulation of multilateral interchange fees (MIFs) for direct debits is essential to create neutral conditions of competition between PSPs and so to permit the development of a single market for direct debits. Such fees for transactions which are rejected, refused, returned or reversed because they cannot be properly executed or result in exception processing (so-called ‘R-transactions’ where the letter ‘R’ can signify ‘reject’, ‘refusal’, ‘return’, ‘reversal’, ‘revocation’ or ‘request for cancellation’), could help to allocate costs efficiently within the internal market. Therefore, it would appear beneficial for the creation of an effective European direct debit market to prohibit per transaction MIF. Nevertheless, R-transaction fees should be allowed, provided that they comply with certain conditions. PSPs must provide clear and understandable information to consumers on R-transaction fees in the interests of transparency and consumer protection. In any event, the R-transaction rules are without prejudice to the application of Articles 101 and 102 of the Treaty on the Functioning of the European Union ( TFEU ). Furthermore, it should be noted that in general direct debits and card payments have different characteristics, in particular in terms of the higher potential for payees to provide incentives for the use of a direct debit by payers through a pre-existing contract between the payee and the payer, whilst for card payments no such prior contract exists and the payment transaction is often an isolated and irregular event. Therefore, the provisions on MIFs for direct debits are without prejudice to the analysis under Union competition rules of MIFs for payment card transactions. Additional optional services are not covered by the prohibition under this Regulation where they are clearly and unequivocally distinct from the core direct debit services and where PSPs and PSUs are completely at liberty to offer or use such services. Nevertheless they remain subject to Union and national competition rules.

Therefore, the possibility to apply per transaction MIF for national and cross-border direct debits should be limited in time and general conditions should be laid down for the application of interchange fees for R-transactions.

The Commission should monitor the level of R-transaction fees across the Union. R-transaction fees in the internal market should converge over time so that they do not vary across Member States to an extent to threaten the level playing field.

In some Member States, there are certain legacy payment services which are credit transfers or direct debits but which have very specific functionalities, often due to historical or legal reasons. The transaction volume of such services is usually marginal. Such services could therefore be classified as niche products. A transitional period for such niche products, sufficiently long to minimise the impact of migration on PSUs, should help both sides of the market to focus first on the migration of the bulk of credit transfers and direct debits, thereby allowing the majority of the potential benefits of an integrated payments market in the Union to be reaped earlier. In some Member States, specific direct debit instruments exist which seem very similar to payment card transactions in that the payer uses a card at the point of sale to initiate the payment transaction but the underlying payment transaction is a direct debit. In such payment transactions the card is used only for a read-out in order to facilitate the electronic generation of the mandate, which has to be signed by the payer at the point of sale. Although such payment services cannot be classified as a niche product, there is a need for a transitional period in relation to such payment services because of the substantial transaction volume involved. In order to enable the stakeholders to implement an adequate SEPA substitute, that transitional period should be of sufficient length.

For the proper functioning of the internal market for payments it is essential to ensure that payers such as consumers, businesses or public authorities are able to send credit transfers to payment accounts held by the payees with PSPs which are located in other Member States and which are reachable in accordance with this Regulation.

In order to secure a smooth transition to SEPA, a valid payee authorisation to collect recurring direct debits in a legacy scheme should remain valid after the migration deadline established in this Regulation. Such an authorisation should be considered as representing consent to the payer’s PSP to execute the recurring direct debits collected by the payee in compliance with this Regulation, in the absence of national law relating to the continued validity of the mandate or customer agreements changing direct debit mandates to allow their continuation. However, consumer rights must be protected and where existing direct debit mandates have unconditional refund rights, such rights should be maintained.

Competent authorities should be empowered to fulfil their monitoring duties efficiently and to take all necessary measures including considering complaints to ensure that PSPs comply with this Regulation. Also, Member States should ensure that complaints against PSUs for not complying with this Regulation can be filed and that this Regulation can be enforced in an effective and efficient manner by administrative or judicial means. To foster compliance with this Regulation the competent authorities of different Member States should cooperate with each other and, where appropriate, with the European Central Bank (ECB) and the national central banks of the Member States and other relevant competent authorities, such as the European Supervisory Authority (European Banking Authority) established by ESAEBAR of the European Parliament and of the Council ( 8 ) (EBA), designated under Union or national legislation applicable to PSPs.

Member States should lay down rules on the penalties applicable to infringements of this Regulation and should ensure that those penalties are effective, proportionate and dissuasive and that they are applied. Those penalties should not be applied to consumers.

In order to ensure that redress is possible where this Regulation has been incorrectly applied, or where disputes occur between PSUs and PSPs concerning rights and obligations arising under this Regulation, Member States should establish adequate and effective out-of-court complaint and redress procedures. Member States should be able to decide that those procedures apply only to consumers or only to consumers and microenterprises.

The Commission should submit a report to the European Parliament, the Council, the European Economic and Social Committee, EBA and the ECB on the application of this Regulation. The report should be accompanied, where necessary, by a proposal for the amendment of this Regulation.

In order to ensure that the technical requirements for credit transfers and direct debits in euro remain up to date, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of those technical requirements. In the Declaration (No 39) on Article 290 TFEU, annexed to the Final Act of the Intergovernmental Conference which adopted the Treaty of Lisbon, the Conference took note of the Commission’s intention to continue to consult experts appointed by the Member States in the preparation of draft delegated acts in the financial services area, in accordance with its established practice. It is of particular importance that the Commission carry out appropriate and transparent consultation during its preparatory work, including with the ECB and all relevant stakeholders. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and the Council.

Since PSPs located in Member States whose currency is not the euro would need to undertake special preparatory work outside the payments market for their national currency, such PSPs should be allowed to defer the application of the technical requirements for a certain period. Member States whose currency is not the euro should, however, comply with the technical requirements to create a true European payments area, which will strengthen the internal market.

In order to ensure broad public support for SEPA, a high level of protection for payers is essential, particularly for direct debit transactions. The current and only pan-European direct debit scheme for consumers developed by the EPC provides for a ‘no-questions-asked’, unconditional refund right for authorised payments during a period of 8 weeks from the date on which the funds were debited, while that refund right is subject to several conditions under Articles 62 and 63 of PSD. In the light of the prevailing market situation and of the necessity to ensure a high level of consumer protection, the impact of those provisions should be assessed in the report that, in accordance with Article 87 of PSD, the Commission shall, no later than 1 November 2012, present to the European Parliament, the Council, the European Economic and Social Committee and the ECB accompanied, where appropriate, by a proposal for its revision.

Directive 1995/46 of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data ( 9 ) governs the processing of personal data carried out pursuant to this Regulation. Migration to SEPA and the introduction of common standards and rules for payments should be based on compliance with national law on the protection of sensitive personal data in Member States and should safeguard the interests of Union citizens.

Financial messages relating to payments and transfers in the SEPA are outside the scope of the Agreement between the European Union and the United States of America of 28 June 2010 on the processing and transfer of Financial Messaging Data from the European Union to the United States for the purposes of the Terrorist Finance Tracking Program ( 10 ) .

Since the objective of this Regulation, namely establishing technical and business requirements for credit transfers and direct debits in euro, cannot be sufficiently achieved by the Member States and can therefore, by reason of its scale or effects, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

Pursuant to Article 5(1) of CBPICR, Member States are to remove settlement-based national reporting obligations on PSPs for balance of payments statistics relating to payment transactions of their customers of up to EUR 50 000. The collection of balance-of-payments statistics based on settlements emerged after the end of foreign exchange controls and until now, constitutes a major data source alongside others such as direct surveys, contributing to good quality statistics. From the beginning of the 1990s some Member States opted to rely more on information reported directly by companies and households than on data reported through banks on behalf of their customers. Although settlement-based reporting represents a solution that, in terms of society as a whole, reduces the cost of balance-of-payments compilation while assuring good-quality statistics, in strict terms of cross-border payments the maintenance of such reporting in some Member States might diminish efficiency and increases costs. Since one aim of SEPA is to reduce the costs of cross-border payments, settlement-based balance-of-payments reporting should be abolished completely.

In order to enhance legal certainty it is appropriate to align the deadlines for interchange fees set out in Article 7 of CBPICR with the provisions laid down in this Regulation.

CBPICR should therefore be amended accordingly,