Brussels, 22/03/2007 (Agence Europe) - Great progress has been made in recent weeks in Council talks on the draft directive on payment services (see EUROPE 9080 and 9362). On Wednesday 21 March, EU member states representatives saw that a qualified majority of states already agree on a draft compromise formulated by the German Presidency but the details still have to be examined in the member states in question. As we went to press, the representatives were mandating the German Presidency to negotiate with the European Parliament and the European Commission in three-way interinstitutional dialogue. The outcome of the three-way talks will determine whether the new directive can be adopted in first reading. If the co-legislating EU institutions agree among themselves, the 27 March 2007 ECOFIN Council should be able to note preliminary consensus. The European Parliament is negotiating through its Economic and Monetary Affairs Committee and the EP itself will vote on the deal in April.
The German Presidency has been pulling out all the stops to reach preliminary agreement at Council level. European sources comment that things were not looking anywhere near as rosy two weeks ago, describing the progress as a real achievement. The compromise hinges on the lending that payment establishments will be allowed to add to their payment portfolio. Member states authorise lending as long as the credit is ancillary and granted exclusively in connection with the execution of a transaction, the repayment of the loan must be made in no more than twelve months, the credit must not be granted form the funds received or held for the purpose of executing a payment transaction, and the payment institution must always have sufficient own resources with regard to the total credit granted.
For example, when a big chain store or supermarket gives customers three months credit to buy household equipment, this involves banks at present. In future, it could be organised directly with the supermarket acting as a payment agency. Close sources suggest two things will have to be taken into account, namely the degree of openness since the duration of the credit deal will impact on the sums involved and the nature of the good bought, and the applicable legal framework. When the payment services directive does not specify the applicable legal rules but the consumer credit directive come into play, detailing consumer protection provisions.
Interviewed by this newsletter about leading by new payment establishments, Jean-Paul Gauzes (EPP-ED, France), EP rapporteur on the draft directive, said that these credit arrangements were indeed the main point of divergence between the EP and the Council. He said the deals should not stretch beyond a month, or three months at most. A dozen member states are reported to take this line. The rapporteur said that the new directive should not infringe on the consumer credit directive, but this might happen if too long a time period were allowed for the credit deals (see EUROPE 9200). Gauzes said he wanted to ensure no unfair competition with banks was introduced because banks are subject to the Basel II Directive (see EUROPE 9308 and 8844) with the arrival on the market of new, less regulated sub-categories of banks. In its opinion published in September 2006, the Economic and Monetary Affairs Committee authorised new payment establishments to issue credit deals for their customers on two conditions - that the credit deal were directly connected with payments and were awarded based on the payment establishment's own resources rather than customer money held for payment operations (see EUROPE 9265).
The preliminary agreement at Council level also covers capital requirements for new entrants on the payment market. Member states agreed on three amounts - 20,000, 50,000 and 125,000 euros - depending on the type of services supplied by the payment establishment. The EP committee favour limits of between 100,000 and 500,000 euros. Aware of the differences, Gauzes said that it was the 'principles' underlying the EP's suggestions that had been agreed upon.
Under the preliminary Council agreement there are also measures to exempt operators which only work micro-payments. The United Kingdom challenged the setting of limits for sums that can be downloaded to electronic purses like the Proton system in Belgium. European sources suggest that the limits could be left for member states to decide and could cover quite large sums of money. On transaction deadline rules, the Council is following the European Commission's suggestion of a D+1 rule, in other words the day after the payment order is made. The Economic and Monetary Affairs Committee recommends D+2, however. The member states want a progress report to be made on implementation of the new directive after three years. (mb)