European Commission misses deadline to report on impact of payment services laws

The Commission was obliged, under the terms of the Payment Services Directive (PSD), to "present" a report on how the Directive has been implemented and on its impact to the European Parliament, Council of Ministers, the European Central Bank and the European Economic and Social Committee by 1 November. However, the Commission has missed this deadline and instead told Pinsent Masons, the law firm behind Out-Law.com, that it will publish the report during the second quarter of 2013.

In correspondence with Pinsent Masons the Commission said that work on the PSD report was well under way and that the review was being based on input from a wide range of sources, including external consultants. The Commission said that the report would be published alongside new legislative proposals on payment services sometime between April and June 2013.

Technology and payments law expert Angus McFadyen of Pinsent Masons said that the proposals may contain plans to make banks take on more responsibility for fraudulent transaction processing. The European Central Bank outlined proposals for a "liability shift" affecting payment service providers earlier this year.

McFadyen said that merchants currently accept most of the liability for fraudulent transactions, but said that may change when the expected reforms to PSD are outlined next year.

"Merchants can often end up losing out if they accept payments from stolen cards even where they have done all the checks that they could do," McFadyen said. "There is a suggestion that there could be a rebalancing of arrangements so that those higher up in the payments chain, such as banks, take on more responsibility for fraudulent transactions where merchants have conducted appropriate authentication tests."

McFadyen said that the legislative proposals could also seek to change the existing "scope" of the PSD and mean that the likes of businesses that operate as 'merchant acquirers' find themselves having to comply with the framework's requirements.

"Merchant acquirers process card payments on behalf of merchants," McFadyen said. "It is highly likely that they will be brought within the scope of the PSD under the reforms. That would mean that they would have to comply with rules such as those governing how quickly payments need to be processed for the first time."

McFadyen also said that there had been "some discussions" that could lead to reductions to the "negative scope exemptions" which he said, if followed through, could see some businesses become subject to the PSD regime for the first time unless they change the way that they operate.

"It is important to understand what the changes are going to be because, when the UK Regulations were first introduced, there was a big shake-up in the way that payment service providers operated and were regulated, and some of the amendments that are being looked at may present more big challenges," he added.

The PSD, introduced in 2007, sets rules governing the electronic means of payment. Its purpose has been to enhance efficiency, competition and innovation in the European payments market by integrating national payment markets. The rules affect banks, e-money issuers, payment service providers, mobile operators and merchants, amongst others. The PSD was implemented into UK law by the Payment Services Regulations in 2009.