Frequently asked questions

The PSD applies to ‘flexible savings accounts’. The issue of which savings accounts can be considered ‘payment accounts’ is dealt with in our Perimeter Guidance (see question 16 of the Q&A). However, payment transactions to and from accounts which are not payment accounts are subject to the conduct of business requirements.

All firms providing payment services (unless they are credit institutions or e-money issuers or expressly excluded from the PSD) who are established in the UK must either be authorised or registered by us to provide payment services, regardless of where they send payments for their customers.  For example, a money remitter, based in Birmingham, serving a niche market for sending payments to Bangladesh and doing no other payments business must be authorised by or registered with us. 

However, most of the conduct of business provisions only apply to transactions where the payment service providers of both the payer and the payee are located in the EEA, and where the payment transactions are in euro, or in the currency of a member state that has not adopted the euro (for example, sterling).

Transactions where either the payee or payer’s payment service provider is based outside the European Economic Area are known as ‘one-leg transactions’.  So, for example, if someone in the UK sends money to someone in Ghana, most of the conduct of business provisions do not apply to the transaction. The Treasury has publicly consulted on whether or not these one-leg transactions should be brought into the scope of the PSRs.  The outcome was that the conduct of business provisions will not be extended to one-leg transactions.

The key test is whether they are offering payment services to a customer.  If the customer requests that the agency bank executes a transaction for them and the transaction is executed, then the conduct of business requirements apply in relation to the transaction.  The agency bank is responsible for ensuring that the requirements are complied with.  The arrangements that the agency bank puts in place to effect the transaction are not relevant to the question of whether the PSRs apply.

See our Perimeter Guidance question 25. The Treasury has also set out its views in its Summary of Responses to its consultation on the draft PSRs (see paragraphs 2.10 to 2.13.

As noted above, the PSD requires payment service providers to provide users with a range of information. In most cases, the PSD states that the information can be ‘provided’ (for example, on paper or by e-mail or text) or ‘made available’ (for example, by a link to a secure website). ‘Made available’ does not necessarily mean the information has to be sent to the customer, but the method of availability must be agreed.

Part 5 of the PSRs sets out the requirements in relation to provision of information. Depending on the type of payment service contract, there are generally conditions relating to the accessibility of the information and the manner in which it is made available or provided. No particular format for the information is specified.

To be a reference interest rate, the rate has to be "from a publicly available source which can be verified by both parties to a payment service contract". Unlike the reference exchange rate definition, the reference interest rate definition does not refer to rates made available by the payment service provider itself. Question 146 on the European Commission’s PSD Q&A website advises that this "can be interpreted as requiring a publicly available 'index or base'. Typically, this comes from independent sources such as LIBOR, Euribor or ECB rates."

We expect the reference interest rates used in practice to be external indices or bases such as LIBOR, Euribor or central bank rates, or perhaps a basket of rates set by other banks.

A payment transaction may involve a currency conversion and this can lead to additional conduct of business obligations, but currency conversion is not a payment transaction in itself. In our view, it is not the intention of the PSD to regulate foreign exchange transactions. We are currently considering how this works in practice and what guidance might be useful for firms on this issue.

Where a payer customer wishes to transfer funds within the EEA and needs those funds to be converted to Euro or another member state currency as part of the payment transaction, the payer’s PSP must inform the customer of any charges that it will levy (regulation 36 or 40 depending on whether the transaction is under a single payment service contract or a framework contract) and must not deduct any further charges before execution, so that the full amount of funds are transferred (regulation 68).

The payee’s PSP can agree with the payee that a charge, paid by the payee, is deducted from the amount transferred before execution of the transaction (regulation 68). After execution, the payee must also be given information on the amount of the charge and the final amount of funds. The payer’s PSP does not need to inform its payer customer of these charges paid by the payee.

Under regulation 45(2)(d) and (3), the information about the exchange rate used and the amount of the payment transaction after the currency conversion may be provided or made available to the customer periodically (and at least once a month), providing this has been agreed in the framework contract. This assumes the currency conversion is done by the credit card issuer and not at the point of sale.

While the provision of credit is not in itself a payment service, the execution of payment transactions covered by a credit line is. Many or most of the terms for an overdraft are inextricable from the payment service and form part of the framework contract or the schedule 4 information that has to be disclosed under regulation 40. Examples include, where relevant, details of interest rates. 

However, regulation 34 disapplies certain information requirements for agreements that are regulated agreements under the Consumer Credit Act 1974 (CCA), given that the CCA regulates the provision of credit rather than the provision of payments. The carve out is there to avoid the overlap and inconsistency that would result from, for example, different requirements for varying interest rates and credit limits applying under the CCA and the PSR. 

We have published two guides – '‘Your bank account' and 'Credit cards'. These are available on our Moneymadeclear website to order or download.

We will shortly be publishing information for consumers that use money remittance services. This will also be on our Moneymadeclear website.

No, there is no provision for a compensation scheme in the PSD. The safeguarding provisions are intended to prevent customer losses in the event of an insolvency of an authorised PI.

The transitional provisions allow certain firms to delay their authorisation or registration – see Regulations 122 and 123 in the Regulations. All payment service providers must comply with the conduct of business requirements from 1 November 2009.

Firms who wish to use the passporting provisions in the Regulations must be authorised by us.

The conduct of business requirements apply to all payment service providers, including UK branches of non-EEA credit institutions providing payment services.

The Commission has advised that their interpretation of the PSD is that such firms need to incorporate within the EEA and seek authorisation in order to carry out payment services.  We have set out our position in question seven of the Perimeter Guidance.

In the case of an EEA payment service provider operating through a branch or agent in the UK, the supervisor for conduct of business purposes is us, as the host state competent authority.  The home state competent authority remains responsible for prudential matters (that is, provisions covered by Title II PSD).

In the case of a UK payment service provider passporting on an establishment basis to another EEA state, the supervisor for conduct of business purposes is the host state competent authority, we remain responsible for prudential supervision.

It is up to each member state to determine their approach to supervision.  We have chosen to take an approach that we believe is proportionate in view of our assessment that there are no significant market failures in this area.  Supervision is therefore initially on a complaints-led basis.  This may change depending on our ongoing assessment of the risks posed to our regulatory objectives by the payment services market.

As PSD is a mostly maximum harmonising directive, the requirements of firms should be essentially the same.  However, there are a number of national options which have resulted in differences and interpretations of the PSD may differ to an extent, as may methods of implementation.

The Principles do not apply to payment service providers unless they are also carrying on an activity regulated under FSMA (for example, accepting deposits or issuing e-money). 

For firms that are subject to the Principles, they do not apply to the extent that they conflict with the PSD. For example, there may be circumstances in which Principle 6 - ‘A firm must pay due regard to the interests of its customers and treat them fairly’ - may be limited by the conduct of business obligations applied by the PSD to credit institutions and authorised e-money issuers.

On The Commission’s website.

The Financial Services Authority (FSA) took over all retail banking conduct regulation for deposit taking and payment services on 1 November 2009. 

This replaced the arrangement by which the Banking Code Standards Board (BCSB) monitored and enforced voluntary Banking Codes which governed banks’ day to day relationships with their customers.

All banks, building societies and credit unions must follow the new FSA banking conduct of business rules.  More information can be found on the Banking Conduct of Business Sourcebook web pages.

Banks and building societies are subject to both the PSRs and to the requirements of the Banking Conduct of Business sourcebook – together the ‘Banking Conduct Regime (BCR)’.