On 15 December 2019, the first amendments introduced by Regulation (EC) No. 924/2009 on cross-border payments within the EU (EU Fees Regulation) that are relevant to the market will take effect. This is a result of Regulation (EU) 2019/518 amending the EU Fees Regulation on and fees for currency conversion (Amending Regulation) entering into force. In light of this, it is now time for payment service providers in particular to take a closer look at the key changes.
Christian Walz and Hugo Godschalk have already provided some insight as to how meaningful the Amending Regulation and its objectives are in their interesting posts on Transparency and DCC as well as EU Fees Regulation ( Regulation 924; Reg 924), at a time when only one proposal for the Amending Regulation existed. In this post I will look at the concrete changes as well as the individual implementation deadlines.
Equal fees for large amounts
Starting 15.12.2019, payment service providers – as already introduced by Regulation (EU) No. 260/2012 (“SEPA Regulation”) – may not levy charges for cross-border payments of EUR 50,000 or more that are different to those fees levied on domestic payments in the member country’s currency. This change appears to be reasonably minimal when compared to the previous plans to not only limit equality of charges to cross-border payments in euros, but to also extend the requirement for equality of charges to cross-border payments in other member currencies.
Transparency and DCC
The introduction of information obligations regarding Dynamic Currency Conversion (DCC) for card-based payment transactions at ATMs and terminals and for online transfers on the other hand is a completely new aspect. DCC is a process by which the currency of a payment transaction can be automatically converted using payment cards. The following information must essentially be provided to the payer:
- Any charges for DCC;
- the amount in the currency used by the payee; and
- the amount in the currency of the payer’s account.
General and pre-contractual information obligations
As part of the general and pre-contractual information obligations and from 19 April 2020, payment service providers offering DCC at ATMs or terminals are required to inform their contractual partners of the total currency conversion charges as a percentage mark-up over the latest available euro foreign exchange reference rates. . These figures must also be provided on a generally available and easily accessible electronic platform (e.g. customer website or banking app). This information obligation can be easily implemented by amending the contractual templates used as well as the website.
Information obligations regarding ATMs and terminals
It will be more of a challenge technically to fulfil the new information obligations at ATMs and terminals. Before a payment transaction is initiated, the customer must be informed about the possibility for DCC and the resulting charges (see above) at the ATM or terminal. Additionally, the amount payable must be shown in the currency of the payee as well as in the currency of the payer’s account before the payment transaction is initiated.
Furthermore, this information needs to be provided to the payer by way of a durable medium (receipt, e-mail, text message, etc.) once the payment transaction has been initiated. In particular, ATM operators whose ATMs do not have a function enabling the printout of receipts are faced with a number of problems as a result of this obligation to provide subsequent information. A further complicating factor is that the information must be made available to the payer free of charge, meaning that any technical retrofitting of the relevant cash machines cannot be financed through the introduction of charges for printing these receipts.
These information obligations must also be adhered to from 19 April 2020.
Information obligations for card-issuing payment service providers
From 19 April 2021, card-issuing payment service providers whose payment cards are linked to the payer’s account must notify payers electronically (e.g. via text message, e-mail, apps, etc.) and without undue delay of any charges for DCC. This applies if the card-issuing payment service providers receive payment orders as a result of cash withdrawals or payments at terminals and these payment orders are denominated in a domestic currency of a member state other than the currency of the payer’s account. If the currency of the payment order corresponds to the currency of the payer’s account, the electronic notification of the charges has to be provided once a month.
Payment service providers need to agree on communication channels with the payer through which the required electronic communication may be made. It should be noted that it will not be possible to agree that the cost of this communication of information shall be borne by the payer. Additionally, payers must be able to waive receipt of such electronic communication. The situation is different if the payer is not a consumer. In this case, it will be possible to contractually waive all of the information obligations described in this section.
Information obligations regarding online credit transfers
Payment service providers offering currency conversions in connection with a credit transfer, which can be carried out directly online via the website or via the mobile banking app, are obliged to inform the payer of the estimated currency conversion fees as part of the general and pre-contractual information obligations.
Additionally, before initiating a payment transaction, the payment service provider has to inform the payer of the estimated total amount of the credit transfer, including any charges for payment transactions and currency conversion charges, in the currency of the payer’s account as well as in the currency used by the payee.
These information obligations apply from 19 April 2020.
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