The Payment Services Directive (the "PSD") must be implemented in the Netherlands by no later than 1 November 2009. The aim of the PSD is to harmonise the market for payment services within the European Union.
The rules contained in the PSD relate to two areas:
- i. a licensing regime for payment service providers; and
- ii. conduct of business requirements for payment service providers, which include obligations to provide information as well as rights and obligations of payment service providers and their clients.
The PSD is supplementary to the initiative of the European banking sector to create a Single Euro Payment Area, SEPA. In the context of SEPA, the European banks have drawn up standards for pan-European payments by means of credit transfers, direct debit, payment cards and credit cards in euro.
In this newsletter we discuss the most important consequences of the implementation of the PSD in the Netherlands.
Status of implementation
In order to meet the 1 November 2009 implementation deadline, a bill was submitted to the lower chamber of the Dutch Parliament (Tweede Kamer) on 20 March 2009 (the "PSD Implementation Bill").
The PSD will be implemented primarily in the following legislation:
- i. the provisions relating to market access for payment service providers will be implemented in the Dutch Financial Supervision Act (Wet op het financieel toezicht, the "FSA");
- ii. the conduct of business requirements regarding the relationship between the payment service provider and the client will be implemented in the Dutch Civil Code (Burgerlijk Wetboek, the "DCC").
In addition, the licence eligibility requirements and the obligations to provide information will be set out in, among other things, a governmental decree. A consultation document regarding this governmental decree was published on 13 May 2009.
Market access / licence eligibility requirements
Under the proposed new rules it is prohibited to conduct the business of payment service provider without a licence from the Dutch Central Bank (De Nederlandsche Bank, the "DCB").
The definition of payment service includes services in relation to:
- the placement of cash on, and withdrawal of cash from, a payment account;
- the execution of various types of payment transactions, such as credit transfers and automatic direct debits;
- the issuance and/or acquisition of payment instruments; and
- money transfers.
Services in relation to various types of transactions are excluded from the definition of payment service. These transactions include:
- payment transactions by means of paper cheques or paper-based vouchers, without the use of a payment account;
- money exchange transactions where the funds are not held on a payment account; and
- payment transactions related to securities asset servicing.
Not only banks, but also, for example, credit card companies that use a three-party payment system qualify as payment service providers. The same applies to certain internet payment service providers and money transfer agencies. Telephone companies may also qualify as payment service providers if (i) the consent of the payer to execute the payment transaction is given by telephone, (ii) the payment is made directly to the telephone company, and (iii) the telephone company is acting only as an intermediary.
Obligation to obtain a licence
Payment service providers will be required to apply to the DCB for a licence as a payment institution, unless an exception or exemption applies (see below). A payment service provider which has obtained a licence will be allowed to provide payment services in the whole of the European Union on the basis of a European passport.
Exceptions / exemptions
If payment services are provided by a credit institution, a separate licence is not required. Credit institutions may provide, or continue to provide, payment services pursuant to their banking licence, provided that it allows them to provide such services.
Under the PSD Implementation Bill, it is possible for a partial or full exemption from the licence obligation for payment service providers to be granted by ministerial regulation. It is not yet known whether and to what extent this option will be exercised in the Netherlands. Pursuant to the PSD an exemption may be granted if:
i. the average of the preceding 12 months' total amount of payment transactions executed by the payment service provider concerned does not exceed 3 million euro per month; and
ii. none of the natural persons responsible for the management or operation of the payment service provider have been convicted of financial crimes.
The new provisions in the FSA will be applicable to institutions which carry out payment services within the European Union and in the states which are parties to the EEA Treaty (Iceland, Liechtenstein and Norway).
Payment service providers with their corporate seat in the Netherlands will have to apply for a licence in the Netherlands. Payment service providers with their corporate seat in another EU / EEA member state will have to apply for a licence in that state. Payment service providers with their corporate seat outside the EU / EEA will be unable, on the basis of the PSD Implementation Bill, to apply for a licence in the Netherlands. Unless they are licensed credit institutions, they will therefore have to establish a separate Dutch legal entity in order to be able to obtain a licence as a payment institution here.
Licence eligibility requirements
In order to obtain a payment institution licence, requirements must be met in the following areas:
- the expertise of the persons who determine the institution's day-to-day policy;
- the trustworthiness of the persons who determine and co-determine the institution's policy;
- the minimum number of persons who determine the institution's day-to-day policy and the country where they carry out their activities;
- the policy relating to the sound and proper operation of the business;
- the governance structure and the structure of the business operations;
- rules relating to the safeguarding of funds which have been received in connection with the payment services; and
- the amount of the institution's capital.
Prohibition on repayable funds
Under the FSA it is in principle prohibited to attract, obtain or have at one's disposal repayable funds. Upon the entry into force of the PSD Implementation Bill, this prohibition will no longer apply to institutions with a payment institution licence from the DCB, insofar as the funds in question are received in connection with the provision of payment services. A payment institution which receives funds in connection with payment services must safeguard them in a manner to be laid down by governmental decree.
Money Service Businesses Act
The PSD Implementation Bill also contains provisions amending the Money Service Businesses Act (Wet inzake geldtransactiekantoren, the "MSBA"). From the date of entry into force of the PSD Implementation Bill, money service businesses will - if and to the extent they provide payment services - no longer be regulated by the MSBA, but by the FSA and DCC provisions described in this newsletter. For other services, such as for example currency exchange services, the MSBA will continue to apply.
Conduct of business requirements
The conduct of business requirements regarding the relationship between payment service providers and clients will be laid down in a new title – Title 7B – to be added to Book 7 of the Dutch Civil Code ("Title 7B"). Below is a brief description of the new provisions that are to be included in Title 7B.
Unlike the licence obligation under the FSA, the provisions of Title 7B will apply to both credit institutions and licensed payment institutions.
Where payment services are provided to consumers, it will not be possible to deviate from the provisions of Title 7B. If the payment service user is not a consumer, many of the provisions can be deviated from by mutual agreement between the parties.
The provisions of Title 7B will be applicable:
- to payment services carried out within the EU in euro or in the currency of an EU member state outside the euro area; and
- if the payment service providers of both the payer and the payee are located within the EU.
There is one exception to this rule: the requirements concerning value dating (please see below) will also apply if one of the payment service providers is located outside the EU.
According to the explanatory memorandum to the PSD Implementation Bill, Title 7B will only apply if Dutch law is applicable pursuant to the rules of private international law.
Framework contracts / single payment transactions
In Title 7B a distinction is made between framework contracts – under which multiple payment transactions are carried out – and single payment transactions. In general, the rules that will apply to single payment transactions are less stringent than in the case of framework contracts.
A number of rules in Title 7B will apply to both single payment transactions and framework contracts. These rules relate to, among others, the following subjects:
- the consent of the payer to the payment order;
- liability for losses relating to unauthorised or incorrect payment transactions;
- cancellation of payment orders;
- charges for the provision of information;
- the option to deviate from the information requirements in the case of low value payments.
Requirements regarding single payment transactions
The provisions which will apply to single payment transactions impose the following requirements (among others):
- the obligation to provide information about the applicable terms and conditions;
- the obligation to provide information about the maximum execution time, the charges payable and, where applicable, the actual or reference exchange rate;
- the obligation to provide information both after receipt and after execution of the payment order, such as a reference enabling the payer to identify the payment transaction, the amount of the transaction, the currency of the payment, the exchange rate used and a breakdown of the charges.
Requirements regarding framework contracts
The requirements applicable to payment transactions under framework contracts will include the following:
- the provision of the applicable terms and conditions to the client before the client is bound by the contract;
- the provision of information about the name of the payment service provider, the relevant supervisory authority, the use of the payment service (including a description of its main characteristics), charges, interest, the currency of payments, exchange rates, communication, liability, safeguards, termination of the framework contract and remedies;
- information which must be provided after the execution of each individual transaction;
- amendments to the framework contract;
- termination of the contract.
Scope of value date and execution period rules
In addition, Title 7B will include provisions on the maximum period for the execution of payment transactions and the maximum period for value dating.
These provisions apply to:
- payment transactions in euro; and
- payment transactions involving only one currency conversion between the euro and the currency of an EU member state outside the euro area, provided that (i) the required currency conversion is carried out in the relevant member state outside the euro area and (ii), in the case of cross-border payment transactions, the transfer is made in euro.
In addition, the provisions apply to other payment transactions in the currency of an EU member state outside the euro area, unless the client and the payment service provider have agreed otherwise. The parties are not free to deviate from the provisions on value dating and, in relation to the provisions on execution periods, can do so only to a limited extent (see below).
Pursuant to Title 7B the payer's payment service provider must ensure that the amount of the payment transaction is credited to the account of the payee's payment service provider at the latest by the end of the next business day. This period may be extended by one business day for paper-initiated transactions. However, a transitional regime applies until 1 January 2012 (see further below).
As stated above and with respect to certain transactions, the client and the payment service provider can agree on a different execution period. However, for intra-community transactions the execution period may not be longer than four business days following receipt of the payment order.
Pursuant to Title 7B, the credit value date for the payee's payment account may not be later than the business day on which the relevant amount is credited to the account of the payee's payment service provider. For debit entries, the value date may not be prior to the debiting of the payer's account.
Other points of attention / transitional regime
The supervision of the provision of payment services will be carried out by Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the "AFM"), the DCB and the Netherlands Competition Authority. Significantly, the AFM will supervise compliance with the conduct of business requirements set out in Title 7B. Consequently, if a payment service provider fails to comply with the relevant provisions, it may face both actions by clients under private law and administrative measures by the AFM.
A transitional regime applies to legal entities that are not credit institutions and that can demonstrate that they were providing payment services in compliance with the FSA prior to 25 December 2009. Until 30 April 2011 such legal entities will not be required to have a licence for the provision of payment services, although they may apply for such a licence on a voluntary basis.
Furthermore, until 1 January 2012 a payer and his/its payment service provider may agree that payment transactions must be executed within a period of three business days, instead of within one business day. For paper-initiated transactions this period may be extended by one day to four business days.
In light of the expected amendments to the FSA and the Dutch Civil Code, we would advise our clients to assess whether their activities include the provision of services that qualify as payment services. If so, the client is a payment service provider and should in any event take the following actions:
- check whether it has a licence from the DCB to operate as a credit institution and whether it is allowed under such licence to provide payment services. If the answer to both questions is yes, a separate licence is not required. Otherwise, a licence may need to be applied for;
- irrespective of whether or not it is a licensed credit institution, check and, if necessary, amend any contracts, terms and conditions and brochures relating to payment services to ensure that they comply with the requirements relating to the provision of information and the rights and obligations of payment service providers and users to be laid down in Title 7B;
- assess whether the internal systems need to be adjusted in connection with the requirements relating to execution periods and value dating.