On 16th December 2010 the European Commission published a proposal for a European Union Regulation establishing technical requirements for credit transfers and direct debits in euros. The proposal currently states that credit transfers will have to comply with these requirements twelve months after the Regulation comes into force. Direct debits will have to comply 24 months after the Regulation becomes effective. This proposal is commonly referred to as the forthcoming SEPA Regulation.
The proposal clarifies that full integration of the euro payments market will only be achieved once Union-wide payment instruments completely replace national legacy instruments.
The European Payments Council welcomes the European Commission’s willingness to legislate on end dates for migration to the Single Euro Payments Area – SEPA. Setting clear deadlines for mandatory transition to SEPA payment schemes, ensures planning security to all market participants.
It is the European Payments Council’s view, however, that the proposal gives rise to several concerns:
- Firstly, the proposal allows – theoretically – for multiple euro credit transfer and direct debit payment schemes. Article 4, paragraph 2 of the proposal mandates that such schemes should be ‘interoperable’. An optimally efficient payment environment, however, requires all payment service providers – servicing all customers – to follow exactly the same scheme rules and standards. This does not prevent competition on SEPA payment products and services.
- The concept of ‘interoperability’ of multiple Union-wide payment schemes puts at risk the fundamental requirement of full reachability of all payment service providers across SEPA. This concept also counters the objective of overcoming the fragmentation of the euro payments market.
- The forthcoming SEPA Regulation should therefore refrain from mandating ‘interoperability’ of euro credit transfer and direct debit payment schemes.
- Secondly, according to article 5, paragraph 4 and articles 12 through 15 of the proposal, the European Commission will be authorised to amend the technical requirements applicable to euro credit transfers and direct debits, through so called ‘delegated acts’. Consultation of payment service users and payment service providers, in the process of identifying these requirements, is not foreseen. In other words, the Commission is determined to take over the task of developing payment functionalities.
- As regards the envisaged executive powers of the European Commission to amend the technical requirements through delegated acts, the proposal fails to meet key criteria applicable to European Union legislation. These criteria are: proportionality, subsidiarity and restraint of administrative burden.
- The European Payments Council’s view is that it is not appropriate for the Commission to take on the role of a de-facto Scheme Manager. The European Payments Council invites the legislator to recognise that self-regulation by banks has generally proven to be the most efficient means to create and maintain innovative, effective, secure and stress-resistant payment systems. The European Payments Council therefore proposes to delete articles 5, paragraph 4 and 12 through 15 from the proposal for the SEPA Regulation.
- Thirdly, article 6 of the proposal states that “no multilateral interchange fee per direct debit transaction or other agreed remuneration with an equivalent object or effect, shall apply to direct debit transactions”.
- In the view of the European Payments Council, article 6 infringes upon the principle of proportionality and the principle of legitimate confidence in the policy pursued in this area to-date. Article 6 is incompatible with the principles of freedom of trade and freedom of enterprise. The European Payments Council also considers that article 6 is based on an error of judgment with regard to the allegedly limited nature of competition for multilateral interchange fees, applying to direct debits.
- The European Payments Council therefore recommends to delete article 6 from the proposal for a SEPA Regulation.
The European Payments Council’s detailed analysis of the proposal for a SEPA regulation establishing technical requirements for credit transfers and direct debits in euros, is available on the EPC website at www.epc-cep.eu.