Payment Services Regulations: Update 2

October 2009

In this update we provide feedback on the applications for authorisation that we have submitted to the FSA to date.  We also take a close look at the crucial area of the conduct of business requirements that all money remitters need to comply with.

Applications for authorisation by the FSA

A number of points arise from the submission of early applications for authorisation:

  • applications are reviewed by the Permissions, Decisions and Reporting Division of the FSA
  • applications are reviewed approximately 21 days after submission
  • the review process is a two stage process. An initial review is performed by a case officer. A second review is performed by a senior case officer
  • following the case officer's review, a list of queries is sent to the applicant
  • in order to support the initial capital requirement of €20,000 the FSA requires copies of the Companies House forms 88(2)
  • where a company uses reserves to support the initial capital requirement, the reserves need to be verified by audited financial statements
  • applicant firms are required to have a complaints handling procedures manual.

 Complaints Procedures Manual

All money remittance businesses are required to have complaints procedures in place by 1 November 2009, whether or not they have applied for registration or authorisation under the Payment Services Regulations (PSRs).  These complaints procedures need to comply with FSA guidelines.  Failure to have procedures in place will be a breach of the PSRs.  Littlejohn can help you prepare a complaints procedures manual that takes into account FSA requirements and ensures that you comply with the PSRs.

Conduct of business requirements

A significant part of the PSRs relate to the conduct of business requirements.  All money remittance businesses need to comply with these requirements from 1 November 2009, regardless of whether those businesses have been authorised or registered by that date.

The conduct of business requirements relate to the provision of information to the customer before and after execution of a payment transaction, and the rights and obligations of both the money remittance business and the customer.

Strangely, although the PSRs require compliance with the conduct of business rules, there is no information that needs to be submitted at the time of registration or authorisation with regard to how business is to be conducted with customers.

All money remittance businesses need to ensure that their conduct of business rules comply with the PSRs.  Any identified shortcomings should be rectified by 1 November 2009.

One of the main elements of supervision of money remittance businesses by the FSA is investigating complaints made by customers.  The FSA, as part of the investigation process, will check for compliance with conduct of business rules.  It is therefore important to ensure that your conduct of business rules are up to date and complete.

Provision of information

  • there are different rules for whether a transaction is carried out as part of an ongoing relationship under a "framework contract" or as a single payment transaction.
  • in terms of framework contracts there are rules relating to: information to be provided before the contract is entered into; changes to the framework contract; termination of the framework contract; information about the execution of a transaction; information about the transaction after execution to both the payer and the payee; and low value transactions.
  • in terms of single payment transactions there are rules relating to: information to be provided before the execution of the transaction; information to be provided to both the payer and payee after the execution of the transaction; and low value transactions.
  • there are rules about charging for information and rules relating to currency conversions.

 Rights and obligations in relation to the provision of payment services

This section of the conduct of business requirements has rules relating to:

  • charging customers
  • authorisation of payment transactions
    • cancellation of transactions by customers
    • blocking payment by a debit or credit card or e-banking service
    • notification of unauthorised payment transactions by customers
    • obligations of the money remitter in relation to debit or credit cards issued
    • the evidence of authorisation and execution of payment transactions
    • the money remitters' liability of unauthorised transactions
    • the payers' liability for unauthorised money remittances
  • execution of payment transactions
    • the rights of the money remitter to refuse to execute a payment order
    • revocation of payment orders by customers
  • amounts transferred and received - deduction of charges
  • execution of payment transactions - time limits
  • value dating and availability of funds
  • liability for providing incorrect unique identifiers ie bank sort code and account number of the payee's account
  • liability for non execution or defective execution of payment transactions.

Clearly the conduct of business requirements are very detailed and comprehensive, and failure to comply will put your business in breach of the PSRs.  Littlejohn is able to review the information that you provide customers about a transaction and your terms of business to ascertain the extent of your compliance.

 How we can help

 Littlejohn can assist you in the following areas in relation to the PSRs:

  • preparation of applications for authorisation
  • preparation of applications for registration
  • advice in relation to complaints procedures
  • advice in relation to conduct of business rules
  • compliance reviews in relation to the PSRs
  • completion of FSA annual returns

 Littlejohn can also provide the following services:

  • audit of financial statements
  • preparation of financial statements
  • corporation tax services

If you would like further information, contact Azhar Rana on 020 7516 2232 or email

 

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