Out-Law / Your Daily Need-To-Know

Major reforms to the way payment services are regulated look set to be formally adopted by EU law makers. 

The Council of Ministers has published "the final compromise text" of the proposed new Payment Services Directive (PSD2), together with an invitation to its permanent representatives committee (COREPER) to approve the text.

An "informal deal" on PSD2, including provisional agreement on the text, was reached by the European Parliament's Economic and Monetary Affairs Committee (ECON) and the Council last month. Following technical work, the Council said, the final text is now ready for approval. MEPs and the Council of Ministers still have to formally agree to the reforms in a vote.

Payments and technology expert Angus McFadyen of Pinsent Masons, the law firm behind out-Law.com, said: "This is a great sign of progress – given the uncertainties around the changes coming out of PSD2, the sooner the final text is settled the better. There’ll be a great deal of work for the European Banking Authority, national regulators, and many organisations involved in delivering payment capabilities, to prepare for implementation in two years’ time."

PSD2 is set to replace the existing Payment Services Directive which has been in place since 2007. The new Directive would need to be implemented into national laws across the EU within two years of it coming into force. The main features of the new legislation include new rules on access to payment accounts, liability allocation provisions, transparency requirements and customer authentication measures.

The new rules are designed to open up access to payment account information to third parties, to reflect the growing number of account aggregators - businesses that enable customers to access different online banking accounts including credit cards, current and savings accounts using a single online portal, and other financial technology companies moving into the payments sphere.

The liability provisions attempt to answer questions such as what happens if a payment is processed incorrectly or late; who takes the blame when there is more than one payment provider or institution involved, and who is ultimately liable to issue refunds and account for charges or losses that customers may have been landed with?

Transaction charges will also be made more transparent, and tighter rules on payment service user authentication aim to ensure that payment service providers can be confident that the people using their services are who they say they are.

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