On 28 August 2008, the FSA published Consultation Paper 08/14: Implementation of the Payment Services Directive (CP08/14). This was a joint consultation with the Financial Ombudsman Service (FOS).

The Payment Services Directive (PSD) requires Member States to regulate the provision of payment services. The PSD must be implemented by all Member States by 1 November 2009. Generally speaking the PSD aims to foster a single market in retail payment services by:

  • Enhancing competition in payment services by removing barriers to entry and ensuring fair market access.
  • Establishing a set of harmonised rules on the information requirements and other rights and obligations which will be applicable to many payment services transactions in the European Economic Area (EEA).

To achieve these aims the PSD:

  • Introduces a new prudential authorisation regime for payment service providers that are neither banks, building societies nor e-money issuers. Such businesses will be known as authorised payment institutions. Payment institutions which obtain authorisation in any EEA State will be able to passport their payment services business and operate in other EEA States.
  • Allows payment service providers operating beneath a certain threshold to be registered under the PSD instead of obtaining authorisation. However, such payment service providers will be unable to passport.
  • Sets out conduct of business requirements on the information to be provided to customers and the respective rights and obligations of payment services users and providers. These requirements apply to all payment institutions and banks, building societies and e-money issuers.

HM Treasury will implement most of the necessary legislation to bring the PSD into force. The FSA will be responsible for the authorisation and registration requirements under the PSD. It will also oversee the conduct of business regime.

In CP08/14 the FSA set out a small number of changes to the FSA Handbook that will enable it to carry out its new responsibilities. The FSA set out the following proposals:

  • Changes to the Dispute Resolution: Complaints sourcebook (DISP) so that FSA complaints handling rules apply to payment service providers.
  • Changes to the jurisdiction of the FOS so that it can perform the out-of-court redress function as required by the PSD.
  • Changes to the Decision Procedure and Penalties Manual (DEPP) and the Enforcement Guide (EG) to explain the FSA’s approach to enforcement of the PSD’s implementing legislation.
  • Use of the FSA logo by payment institutions.
  • Certain consequential changes to the FSA Handbook.

The deadline for comments on CP08/14 is 28 November 2008.

View Consultation Paper 08/14: Implementation of the Payment Services Directive, 28 August 2008