Payment Services Directive: implementation in Belgium

• the Law of 10 December 2009 on payment services, published on 15 January 2010 in the Belgian Official Gazette (the Payment Services Law);
• the Law of 21 December 2009 on the status of payment institutions, access to the activities of payment service providers and payment systems published on 19 January 2010 in the Belgian Official Gazette (the Payment Institution Law); and
• the Law of 22 December 2009 amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services and introducing an injunction (action en cessation/vordering tot staking) for violation of the Payment Services Law, published on 19 January 2010 in the Belgian Official Gazette.   

The Payment Institution Law has entered into force with retroactive effect as from 1 November 2009 whereas the Payment Services Law will enter into force on 1 April 2010.
Only the first two laws are discussed in this newsflash, which refers to them together as the Law.

The aim of the PSD is to create a common legal framework throughout the European Economic Area (EEA) and facilitate the creation of an integrated payment market. In addition, the implementation of the PSD into domestic laws of European countries should lead to more competition in the payment systems and so benefit consumers.

The implementation of the PSD into domestic legislations of European countries is a crucial step towards the realisation of the Single Euro Payment Area (SEPA). The implementation of the PSD will greatly facilitate the operational implementation of SEPA by harmonizing the applicable legal framework throughout the European Economic Area. The implementation of the PSD is therefore closely linked and complementary to the establishment of SEPA. However, an important difference is that the PSD covers payment in any EU currency and its scope is not limited to euros.

The rules set forth in the PSD relate to two areas:

• the licensing of Payment Service providers; and 
• the conduct of business standards for Payment Service providers including the obligation to provide certain information and the rights and obligations of Payment Service providers and their clients.

1.      Material scope of the Law

The provision of Payment Services to clients is as of the entry into force of the Law a regulated activity which may only be offered by certain entities or institutions (see below).

The Law applies solely to certain qualifying payment services (the Payment Services) the list of which is set out in appendix 1 of the Payment Institution Law. The list of Payment Services includes inter alia the following services:

• services relating to the operation of payment accounts (including, but not limited to withdrawal, transfer (standing orders), automatic direct debit (one-off direct debit) and card transactions;
• execution of payment transactions;
• card issuing; and
• certain services such as mobile or fixed phone payments and payments from other digital devices.

The Law excludes some payment services from its scope such as:

• payment transactions by cheque or similar paper based documents;
• foreign exchange offices activities;
• professional cash transportation (notes and coins);
• Payment Services relating to securities asset servicing such as dividend payments; and
• certain payment transactions through telecommunication, digital or IT devices.

As already mentioned, the Law (in line with the PSD) covers all payments made in euro or in another currency as long as the payment is made within the EEA.

2.      Personal scope of the Law

Payment Services may only be offered by certain institutions, being:

• credit institutions located in Belgium as well as credit institutions located in another country of the EEA but authorised to exercise banking activities in their respective countries;
• e-money institutions located in Belgium as well as e-money institutions authorised to exercise banking activities in their respective countries;
• the Post (La Poste/De Post) ;
• the National Bank of Belgium and the European Central Bank;
• Belgian public authorities; and
• all payment institutions located in Belgium and that provide Payment Services in the capacity of payment institutions (the Payment Institutions).

The Payment Institutions (as defined under f above) constitute a new category of Payment Service provider to which a licensing regime applies. These institutions must be authorised in order to be able to operate as a Payment Institution in Belgium and must be registered in a special registry held by the CBFA (published on the CBFA’s website). Certain entities are exempted from obtaining the said authorisation and are allowed to provide Payment Services to the public.

3.      Geographic scope

The Payment Institutions Law applies to Payment Institutions that provide Payment Services in Belgium. However, Payment Institutions duly registered in another EEA Member State are authorised to provide Payment Services in Belgium.

The Payment Services Law applies to Payment Services offered within the Belgian territory. However, it also applies to Payment Services carried out in euro or in another currency of an EU Member State outside the euro area. Moreover, the Payment Services Law is applicable to Payment Services if the Payment Service provider of the payer and the payee are located in the EU or if there is only one Payment Service provider in the transaction and he is located in the EU.

4.      Code of Conduct

a.    Information requirements

The user of Payment Services must be provided with information the level of which will differ depending upon whether it is (i) an isolated payment, (ii) a payment covered by a framework agreement. The Payment Services Law provides a comprehensive list of information to be provided to the user of Payment Services before the payment transaction as well as after the payment transaction.

b.    Rights and obligations

The Payment Services Law also details the rights and obligations of Payment Service providers and users of Payment Services.

The main obligations under the Law can be summarised as follows:

• Customers must use any payment instrument in accordance with the terms and conditions of issue and use, keep it secure, and notify without  delay the issuer of the instrument in case of of loss, theft, misappropriation or unauthorised use;
• Payment Service providers have to ensure that the personalised security features are not accessible to other parties;
• for payments in euro, in the domestic currency of the EU Member State concerned, or where there is only one currency conversion taking place in the non-euro zone EU Member State between euro and its domestic currency and the transfer is cross border and denominated in euro, the Law introduces a compulsory maximum timeframe for execution of D+1 (possibility to agree on a D+3 rule until January 2012);
• the credit value date should not be later than the business day on which the amount is credited to the account of the Payment Service provider of the payee and that the debit value date should not be earlier than the date on which the amount of the payment is debited to the account of the payer; and  
• in case of an unauthorised transaction, the Payment Service provider has an obligation to indemnify the Payment Services user and to restore its bank account except when the Payment Services user acted fraudulently or with gross negligence.

In addition, when the Payment Services user is not a consumer it can be agreed upon that certain obligations provided for by the Law will not apply to the relationship between the Payment Service provider and the Payment Services user. The same principles may apply for transactions that do not exceed 30 euros for a single payment or in case of expense limited up to an amount of 150 euros.

5.      Conclusion

When considering the new legislation, we recommend to institutions that may fall within the personal scope of the law to verify whether they could be considered as a Payment Institution offering to the public one or more qualifying Payment Services.  If so, the relevant institution needs to apply for a license as Payment Institution. Concretely, Payment Institutions must provide the CBFA with some information the exhaustive list of which is set out in the Law. Based on this information the CBFA must decide within three months from the request whether or not to grant the license to the Payment Institution. A list of Payment Institutions entitled to provide Payment Services is publicly available (on the CBFA’s website). If a license is duly obtained in Belgium, the Payment Service provider will be able to provide Payment Services throughout the European Economic Area by means of a European Passport.

In case a license must be obtained, it will also be necessary to check whether all documentation describing or relating to the offered Payment Services, such as terms and conditions, comply with the Law. Terms and conditions must be in line with the Payment Services Law at the latest on the date of its entry into force (1^st April 2010). However, Payment Services users should have been notified of all changes to terms and conditions before 1 February 2010. Given the short deadline, it is expected that several Payment Institutions may be late. 

Companies incorporated under Belgian law which at the date of entry into force of the Payment Institution Law (1^st November 2009) provide Payment Services, are authorised to pursue these activities until 30 April 2011 included, without obtaining the license from the CBFA. However, they must have (except for foreign exchange offices and Belgian investment companies) introduced themselves to the CBFA at the latest on 31 December 2009 and enumerate the Payment Services that are provided by them. They cannot provide other Payment Services than those mentioned to the CBFA without obtaining a license for the new Payment Services.

Generally speaking, Payment Institutions that fail to comply with the Law are subject to administrative and criminal penalties.