PSD2 – One leg transactions + all currencies in scope

What’s the issue?

The term: one leg transaction is an expression which came about under PSD1 to refer to those payment transactions where the payer’s or the recipient’s PSP is based outside of the EU (indicating that the sender or the recipient is out of the EU).

Under PSD1, one leg transactions were largely out of scope.

It was also only EU currencies that were principally targeted.

One Leg Transactions – what’s changed with PSD2?

PSD2 now looks to bring one-leg transactions within much of its scope as well as covering all currencies. An advanced draft of PSD2 provides the following in Article 2(4) Scope (emphasis added):

“Title III, except for point (b) of Article 45(1), point (e) of Article 52(2), point (g) of Article 52(5) and point (a) of Article 56, and Title IV, except for Article 62(2) and (4), Articles 76, 77, 81, 83(1), 89 and 92, apply to payment transactions in all currencies where only one of the payment service providers is located within the Union, in respect to those parts of the payments transaction which are carried out in the Union.”

To help understand this a little better:

Title III of PSD2 includes the ‘Transparency of conditions and information requirements for payment services” – such as the prescribed information and conditions that must be included in a PSPs framework contract.

Title IV of PSD2 relates to the ‘Rights and obligations in relation to the provision an use of payment services’.

Fortunately (and sensibly) the D+1 prescribed payment execution times still do not apply to ‘one-leg ‘ transactions.

A comparison and reproduction of key applicable provisions

PSD1 PSD2
Article 1 – Scope [Geographic scope]

 

1. This Directive shall apply to payment services provided within the Community. However, with the exception of Article 73, Titles III and IV shall apply only where both the payer’s payment service provider and the payee’s payment service provider are, or the sole payment service provider in the payment transaction is, located in the Community

 

Article 2 – Scope

 

4. Title III, except for point (b) of Article 45(1), point (e) of Article 52(2), point (g) of Article 52(5) and point (a) of Article 56, and Title IV, except for Article 62(2) and (4), Articles 76, 77, 81, 83(1), 89 and 92, apply to payment transactions in all currencies where only one of the payment service providers is located within the Union, in respect to those parts of the payments transaction which are carried out in the Union.

 

Article 1 – Scope [Currencies]

 

2. Titles III and IV shall apply to payment services made in euro or the currency of a Member State outside the euro area.

 

Title III provisions not applicable to one leg transactions
 

Single Payment Transactions

 

Information and conditions

 

Article 45(1)(b)

 

1. Member States shall ensure that the following information and conditions are provided or made available by the payment service provider to the payment service user:

 

… (b) the maximum execution time for the payment service to be provided;

 

Framework contracts

 

Article 52(2)(e)

 

Member States shall ensure that the following information and conditions are provided to the payment service user:

 

 

2. on use of the payment service:

 

 

(e) the maximum execution time for the payment services to be provided;

 

Framework contracts

 

Article 52(5)(g)

 

Member States shall ensure that the following information and conditions are provided to the payment service user:

 

5. on safeguards and corrective measures:

 

(g) the conditions for refund in accordance with Articles 76 and 77;

 

Information before execution of individual payment transactions

 

Article 56(a)

 

In the case of an individual payment transaction under a framework contract initiated by the payer, a payment service provider shall, at the payer’s request for this specific payment transaction, provide explicit information on all of the following:

 

(a) the maximum execution time;

 

 

Title IV provisions not applicable to ‘one leg’ transactions

 

Charges applicable

 

Article 62(2)

 

2. Member States shall require that for payment transactions provided within the Union, where both the payer’s and the payee’s payment service providers are, or the sole payment service provider in the payment transaction is, located therein, the payee pays the charges levied by his payment service provider, and the payer pays the charges levied by his payment service provider.

 

Charges applicable

 

Article 62(4)

 

4. In any case, Member States shall ensure that the payee shall not request charges for the use of payment instruments for which interchange fees are regulated under Chapter II of Regulation (EU) 2015/751 and for those payment services to which Regulation (EU) No 260/2012 applies.

 

Refunds for payment transactions initiated by or through a payee

 

Article 76

 

1. Member States shall ensure that a payer is entitled to a refund from the payment service provider of an authorised payment transaction which was initiated by or through a payee and which has already been executed, if both of the following conditions are met: (a) the authorisation did not specify the exact amount of the payment transaction when the authorisation was made; (b) the amount of the payment transaction exceeded the amount the payer could reasonably have expected taking into account the previous spending pattern, the conditions in the framework contract and relevant circumstances of the case. At the payment service provider’s request, the payer shall bear the burden of proving such conditions are met. The refund shall consist of the full amount of the executed payment transaction. The credit value date for the payer’s payment account shall be no later than the date the amount was debited. Without prejudice to paragraph 3, Member States shall ensure that, in addition to the right referred to in paragraph 1, for direct debits as referred to in Article 1 of Regulation (EU) No 260/2012, the payer has an unconditional right to a refund within the time limits laid down in Article 77 of this Directive.

 

2. However, for the purposes of point (b) of the first subparagraph of paragraph 1, the payer shall not rely on currency exchange reasons if the reference exchange rate agreed with its payment service provider in accordance with point (d) of Article 45(1) and point (b) of Article 52(3) was applied.

 

3. It may be agreed in a framework contract between the payer and the payment service provider that the payer has no right to a refund where:

 

(a) the payer has given consent to execute the payment transaction directly to the payment service provider; and

 

(b) where applicable, information on the future payment transaction was provided or made available in an agreed manner to the payer for at least four weeks before the due date by the payment service provider or by the payee.

 

4. For direct debits in currencies other than euro, Member States may require their payment service providers to offer more favourable refund rights in accordance with their direct debit schemes provided that they are more advantageous to the payer.

 

Requests for refunds for payment transactions initiated by or through a payee

 

Article 77

 

1. Member States shall ensure that the payer can request the refund referred to in Article 76 of an authorised payment transaction initiated by or through a payee for a period of eight weeks from the date on which the funds were debited.

 

2. Within 10 business days of receiving a request for a refund, the payment service provider shall either refund the full amount of the payment transaction or provide a justification for refusing the refund and indicate the bodies to which the payer may refer the matter in accordance with Articles 99 to 102 if the payer does not accept the reasons provided.

 

The payment service provider’s right under the first subparagraph of this paragraph to refuse the refund shall not apply in the case set out in the fourth subparagraph of Article 76(1).

 

Execution of payment transactions

 

Amounts transferred and amounts received

 

Article 81

 

1. Member States shall require the payment service provider(s) of the payer, the payment service provider(s) of the payee and any intermediaries of the payment service providers to transfer the full amount of the payment transaction and refrain from deducting charges from the amount transferred.

 

2. However, the payee and the payment service provider may agree that the relevant payment service provider deduct its charges from the amount transferred before crediting it to the payee. In such a case, the full amount of the payment transaction and charges shall be separated in the information given to the payee.

 

3. If any charges other than those referred to in paragraph 2 are deducted from the amount transferred, the payment service provider of the payer shall ensure that the payee receives the full amount of the payment transaction initiated by the payer. Where the payment transaction is initiated by or through the payee, the payment service provider of the payee shall ensure that the full amount of the payment transaction is received by the payee.

 

EXECUTION TIME AND VALUE DATE

 

Payment transactions to a payment account

 

Article 83(1)

 

1. Member States shall require the payer’s payment service provider to ensure that after the time of receipt as referred to in Article 78, the amount of the payment transaction will be credited to the payee’s payment service provider’s account by the end of the following business day. That time limit may be extended by a further business day for paper-initiated payment transactions.

 

 

LIABILITY

 

Payment service providers’ liability for non-execution, defective or late execution of payment transactions

 

Article 89

 

1. Where a payment order is initiated directly by the payer, the payer’s payment service provider shall, without prejudice to Article 71, Article 88(2) and (3), and Article 93, be liable to the payer for correct execution of the payment transaction, unless it can prove to the payer and, where relevant, to the payee’s payment service provider that the payee’s payment service provider received the amount of the payment transaction in accordance with Article 83(1). In that case, the payee’s payment service provider shall be liable to the payee for the correct execution of the payment transaction.

 

Where the payer’s payment service provider is liable under the first subparagraph, it shall, without undue delay, refund to the payer the amount of the non-executed or defective payment transaction, and, where applicable, restore the debited payment account to the state in which it would have been had the defective payment transaction not taken place. The credit value date for the payer’s payment account shall be no later than the date on which the amount was debited. Where the payee’s payment service provider is liable under the first subparagraph, it shall immediately place the amount of the payment transaction at the payee’s disposal and, where applicable, credit the corresponding amount to the payee’s payment account. The credit value date for the payee’s payment account shall be no later than the date on which the amount would have been value dated, had the transaction been correctly executed in accordance with Article 87. Where a payment transaction is executed late, the payee’s payment service provider shall ensure, upon the request of the payer’s payment service provider acting on behalf of the payer, that the credit value date for the payee’s payment account is no later than the date the amount would have been value dated had the transaction been correctly executed. In the case of a non-executed or defectively executed payment transaction where the payment order is initiated by the payer, the payer’s payment service provider shall, regardless of liability under this paragraph, on request, make immediate efforts to trace the payment transaction and notify the payer of the outcome. This shall be free of charge for the payer.

 

2. Where a payment order is initiated by or through the payee, the payee’s payment service provider shall, without prejudice to Article 71, Article 88(2) and (3), and Article 93, be liable to the payee for correct transmission of the payment order to the payment service provider of the payer in accordance with Article 83(3). Where the payee’s payment service provider is liable under this subparagraph, it shall immediately re-transmit the payment order in question to the payment service provider of the payer. In the case of a late transmission of the payment order, the amount shall be value dated on the payee’s payment account no later than the date the amount would have been value dated had the transaction been correctly executed. In addition, the payment service provider of the payee shall, without prejudice to Article 71, Article 88(2) and (3), and Article 93, be liable to the payee for handling the payment transaction in accordance with its obligations under Article 87. Where the payee’s payment service provider is liable under this subparagraph, it shall ensure that the amount of the payment transaction is at the payee’s disposal immediately after that amount is credited to the payee’s payment service provider’s account. The amount shall be value dated on the payee’s payment account no later than the date the amount would have been value dated had the transaction been correctly executed.

 

In the case of a non-executed or defectively executed payment transaction for which the payee’s payment service provider is not liable under the first and second subparagraphs, the payer’s payment service provider shall be liable to the payer. Where the payer’s payment service provider is so liable he shall, as appropriate and without undue delay, refund to the payer the amount of the non-executed or defective payment transaction and restore the debited payment account to the state in which it would have been had the defective payment transaction not taken place. The credit value date for the payer’s payment account shall be no later than the date the amount was debited. The obligation under the fourth subparagraph shall not apply to the payer’s payment service provider where the payer’s payment service provider proves that the payee’s payment service provider has received the amount of the payment transaction, even if execution of payment transaction is merely delayed. If so, the payee’s payment service provider shall value date the amount on the payee’s payment account no later than the date the amount would have been value dated had it been executed correctly. In the case of a non-executed or defectively executed payment transaction where the payment order is initiated by or through the payee, the payee’s payment service provider shall, regardless of liability under this paragraph, on request, make immediate efforts to trace the payment transaction and notify the payee of the outcome. This shall be free of charge for the payee.

 

3. In addition, payment service providers shall be liable to their respective payment service users for any charges for which they are responsible, and for any interest to which the payment service user is subject as a consequence of non-execution or defective, including late, execution of the payment transaction.

 

Right of recourse

 

Article 92

 

1. Where the liability of a payment service provider under Articles 73 and 89 is attributable to another payment service provider or to an intermediary, that payment service provider or intermediary shall compensate the first payment service provider for any losses incurred or sums paid under Articles 73 and 89. That shall include compensation where any of the payment service providers fail to use strong customer authentication.

 

2. Further financial compensation may be determined in accordance with agreements between payment service providers and/or intermediaries and the law applicable to the agreement concluded between them.