FCA - Implementation of PSD 2
Response to the consultation
Credit unions are exempt from the Payment Services Directive and HM Treasury proposes to extend this exemption once again to the revised Payment Services Directive (PSD2). This is a position that ABCUL and our membership supports in order to allow for a proportionate regime for smaller credit unions wishing to provide certain limited payment services in support of those at the margins of the financial system and at risk of exclusion from mainstream payment services.
Some credit unions also provide more sophisticated payment services as agency providers sponsored by direct participants in the payments system. This can be through the provision of e-money via an e-money license holder or through full agency access via a sponsor bank as under the model currently being rolled out to a number of credit unions by ABCUL’s subsidiary, Cornerstone Mutual Services, under the Credit Union Expansion Project. These credit unions are subject to compliance requirements as per the payment scheme rules and the expectations of sponsor banks in terms of ensuring that the payments for which they act as correspondent comply with the requirements that they are subject to.
The exemption regime therefore provides flexibility for credit unions to adopt a range of approaches to the provision of payment services in order to meet a range of societal needs and safeguards the role of smaller credit unions in providing some limited payment services to those at risk of exclusion. It is a responsive and proportionate regulatory framework facilitating competition and choice for the benefit of consumers.
Given the exemption, the main item of relevance to credit unions in the consultation is that of the proposed changes to BCOBS which credit unions are subject to in lieu of the PSD2 requirements for their payments business. Having consulted with our membership we have no objections to the requirements which represent a reasonable and proportionate extension of consumer protections within PSD2.
In respect of the provisions in relation to incorrect payment routing and making reasonable efforts to recover such funds, we would appreciate further guidance in relation to what constitutes “reasonable efforts” in light of the new provision for a payee PSP to co-operate with a payer PSP’s request for assistance in recovering funds. This new requirement has implications for the extent of action taken by the payer which might be considered reasonable in the face of a potentially uncooperative payee PSP. Any clarification of this that the FCA can provide would be beneficial to smaller credit unions in understanding their rights and obligations in relation to any such occurences.
Our final comment relates to the new provisions relating to the provision of access for PSPs. We are encouraged to see the provisions proposed to comply with regulation 105 in relation to the POND basis for access provision for PSPs. This is in keeping with the activity of the Payment Systems Regulator and the Payments Strategy Forum in opening up and enhancing the terms of indirect access to payments for smaller agency and non-agency PSPs. However, we believe that, though credit unions are exempt from PSD2, it is unfair to exclude credit unions and other exempted PSPs from these access provisions. To do so directly conflicts with the wider ambition of the regulatory authorities to broaden the provision of payment services and support smaller providers to access payments accounts on a fair and equal basis. We would like to see these expectations extended to all PSPs, including those exempt from the requirements of PSD2.
The PDF version of this response is available to download on the right-hand side.