On 10 October 2017, draft bill n°7195 transposing PSD2 into national law was submitted to the Luxembourg Parliament.
Background
PSD21 entered into force on 12 January 2016 and is applicable from 13 January 2018, by which time Member States will have to adopt and publish the measures necessary to comply with PSD22. PSD2 repeals the first payment service directive (PSD)3 effective 13 January 2018, as the review of PSD revealed significant technical innovation in the retail payments market, such as the emergence of financial technology (FinTech) companies that challenged traditional forms of payment by offering affordable and highly digitalized services, many falling entirely or in large part outside the scope of PSD.
The key changes to the regulatory regime established by PSD2 may be summarized as follows:
- Extension of scope to include (i) non-EEA currency payments between EEA-domiciled payment service providers (PSPs) and (ii) ‘one-leg’ transactions (where one of the PSPs is located outside the EEA), in any currency;
- Increase in the level of consumer protection through strong consumer authentication (or two-factor authentication) and secure communication for electronic payments;
- Extension of market access to payment initiation service providers and account information service providers, also called third-party payment service providers (TPPs), licensing and registering TPPs and granting them access to certain customer information4;
- Limitation of the liability of the consumer to a maximum amount of 50 EUR for any unauthorized payments due to lost or stolen payment devices;
- Specification and restriction of the exemptions under PSD (e.g., payment services provided exclusively within limited and closed networks) in view of ensuring consistency throughout the Member States;
- Extension of the competencies of the European Banking Authority (EBA), such as a central register of payment institutions authorized by and registered with EBA.
Transposition and Member States Options
In Luxembourg, draft bill n°7195 will, in view of transposing PSD2, extensively amend the law of 10 November 2009 on payment services (LPS), which transposed PSD, as well as the E-money directive5. It can be noted that although PSD2 is a maximum harmonisation Directive, it still offers certain options for Member States regarding a certain number of dispositions. Luxembourg’s choices with regard to said options are listed below:
PSD2
Description
Transposed?
Article 2(5)
Special purpose institution exemption
No
Article 8(3)
Derogation not to apply the calculation of own funds (Article 9) to payment institutions (PIs) which are included in the consolidated supervision of the parent credit institution.
Yes: new Article 16(4) LPS
Article 9(1)
Competent authorities may adjust the own fund requirement in the event of a material change in a PI’s business since the preceding year.
Yes: new Article 17(1) LPS
Article 9(3)
The competent authorities may, based on an evaluation of the risk management processes, risk loss data base and internal control mechanisms of a PI, require the PI to hold an amount of own funds which is up to 20% higher than the amount which would result from the application of the method chosen in accordance with paragraph 1, or permit the payment institution to hold an amount of own funds which is up to 20% lower than the amount which would result from the application of the method chosen in accordance with paragraph 1.
Yes: new Article 17(3) LPS
Article 24(3)
Member States (MS) may apply this Article (professional secrecy) taking into account, mutatis mutandis, Articles 53 to 61 of Directive 2013/36/EU.
Yes: new Article 33(2) LPS
Article 29(2)
The competent authorities of the host MS may require that PIs having agents or branches within their territories shall report to them periodically on the activities carried out in their territories.
Yes: new Article 34(6bis) section 1 LPS
Article 29(4)
MS may require PIs that operate on their territory through agents under the right of establishment and the head office of which is situated in another MS to appoint a central contact point in their territory to ensure adequate communication and information reporting on compliance with Titles III and IV.
Yes: new Article 34(6bis) section 2 LPS
Article 32(1)
MS may exempt or allow their competent authorities to exempt certain small PIs from the application of all or part of the procedure and conditions set out in Sections 1 to 3, with the exception of Articles 14, 15, 22, 24, 25 and 26.
Yes: new Article 48(1) LPS
Article 32(4)
MS may also provide that any natural or legal person registered in accordance with paragraph 1 of this Article may engage only in certain activities listed in Article 18.
Yes: new Article 48(2) LPS
Article 38(2)
MS may apply the provisions in Title III to micro enterprises in the same way as to consumers.
No
Article 42(2)
For national payment transactions, MS or their competent authorities may reduce or double the amounts referred to in §1. For prepaid payment instruments, MS may increase those amounts up to 500 EUR.
Yes: new Article 63(2) LPS
Article 55(6)
Opportunity to provide more favourable conditions (charges and duration) for payment service users, in regard to the termination of framework contracts.
No
Article 57(3)+ 58(3)
Information on individual payment transactions should be provided to payers and payees, free of charge, on paper or another durable medium at least once a month.
No
Article 61(2) + (3)
MS may provide that Article 102 [ADR procedures] does not apply where the payment service user is not a consumer. MS may provide that provisions in this Title [Title IV] are applied to micro enterprises in the same way as to consumers.
No
Article 62(5)
MS may prohibit or limit the right of a payee to request charges, taking into account the need to encourage competition and promote the use of efficient payment instruments.
Yes: new Article 79(3) LPS
Article 63(2)
For national payment transactions, MS or their competent authorities may reduce or double the amounts referred to in §1.
Yes: new Article 80(2) LPS
Article 63(3)
MS may limit that derogation to payment accounts on which electronic money is stored or payment instruments of a certain value.
No
Article 74(1b)
Where the payer has neither acted fraudulently nor with intent failed to fulfil its obligations under Article 69, MS may reduce the liability referred to in the first subparagraph, taking into account in particular the nature of the personalised security credentials of the payment instrument and the specific circumstances under which the payment instrument was lost, stolen or misappropriated
No
Article 76(4)
For direct debits in currencies other than euro, MS may require their PSPs to offer more favourable refund rights in accordance with direct debit schemes, provided that they are more advantageous to the payer.
No
Article 86
For national payment transactions, MS may provide for shorter maximum execution times than those provided for in this section.
No
Article 101(2)
MS may introduce or maintain rules on dispute resolution procedures that are more advantageous to the payment service user than the one outlined in the first subparagraph. Where they do so, those rules shall apply.
No
Article 109(2) + (4)
MS may provide that legal persons referred to in the first subparagraph or paragraph 1 of this Article shall automatically be granted authorisation and entered in registers referred to in Articles 14 and 15 if the competent authorities already have evidence that the requirements laid down in Articles 5 and 11 are complied with. The competent authorities shall inform the legal persons concerned before such authorisation is granted.
Yes: new Article 116 LPS
Consideration of EBA texts
As a reminder, EBA, with the central task of developing European supervisory standards, has been granted extended competencies under PSD2 and has been mandated to develop six different Regulatory Technical Standards (RTS), five sets of guidelines (GLs) and a register in the following areas:
- Passporting (coordination of home-host supervision)
- Consumer protection
- Authorisation of PSPs
- EBA register of payment institutions and of exempted entities and services
- Security (strong customer authentication and communication)
The application date for the RTS and GLs is also 13 January 2018, with the exception of the RTS on Strong Authentication and Secure Communication, which will become applicable 18 months after their entry into force, which would suggest an application date of the RTS in November 2018 at the earliest.
This means that the new LPS will not directly refer to the EBA texts; they must however be considered and applied by the national regulator and PIs as additional supranational rules.
Transitional provisions
These are laid down in the new Article 116 of the LPS and may be summarized as follows:
- Grandfathering clause for authorized PIs and E-money institutions (EMIs): 30 months (i.e., 13 July 2018).
- Authorization may be automatically extended if the regulator already possesses evidence that a PI or EMI complies with the new requirements.
- Grandfathering clause for small (registered) PIs and EMIs: 36 months (i.e., 13 January 2019).
- TPPs having been active before 12 January 2016 may continue their activities after the entry into force of PSD2 (i.e., 13 January 2018) without authorization until the date of application of the RTS on Strong Authentication and Secure Communication (see above).
- The security measures laid down in Articles 81-1, 81-2, 81-3 (linked to TPPs) and Article 105-3 (strong customer authentication) will apply on the date of application of the RTS on Strong Authentication and Secure Communication (see above).
Given this timeline, it can be asked whether TPPs that are presently unregulated will be able, from January 2018 onwards, to build enough trust with customers and banks in view of launching and/or expanding their online payment initiation and account information services, or whether only the application date of the RTS on Strong Authentication and Secure Communication will be the starting point for these new entrants to obtain the necessary access to customer trust and customer information.
Still to come
It can be noted that the upcoming adoption of draft bill n°7128 dealing with the new Regulation on information accompanying transfer of funds6 and the 4th Anti-money Laundering Directive7 will bring further amendments to the current version of the LPS.
Draft bill n°7195 will in addition be subject to the opinion of the State Council, the National State Bank and the Chamber of Commerce before being adopted by the Luxembourg Parliament.
The content of this article is intended to provide a general overview to the subject matter.
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1. Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC.
2. See transitional provisions.
3. Directive 2007/64/EC.
4. Access to account (XS2A) rule.
5. Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC.
6. Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006.
7. Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC.
