EPC Plenary Meeting Update

EPC Plenary Meeting Update

Main decisions taken in March 2013

18 July 13

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European Central Bank publishes first report on the migration towards the Single Euro Payments Area and warns against risks of late migration

The European Central Bank (ECB) acts as an observer in all European Payments Council () working and support groups and in the Plenary. At the Plenary meeting which took place on 21 March 2013, the representative of the ECB summarised the main aspects covered in the first report on the migration towards the Single Euro Payments Area () published by the ECB on that day. The European Union  (EU) 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro' (the Regulation) defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this regulation. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes will be replaced by Credit Transfer () and Direct Debit (SDD). The ECB report describes the state of play of the migration process in euro area countries, and provides guidance on the management of the transition process. According to the related ECB press release, the report shows that most corporations have already completed the planning phase and know what will mean for them in practical terms. When it comes to the actual implementation however, a number of companies have adopted very late internal deadlines, even as far as to the end of 2013. "This is a source of concern in particular when it comes to the migration to the direct debit scheme. More worryingly, small and medium enterprises' (SMEs) and local public administrations' awareness of is still fragmented and the level of preparedness is rather poor," says the ECB press release. The ECB "strongly advocates that all stakeholders, including 'big billers', public administrations and SMEs, migrate at the earliest stage possible, preferably by the third quarter of 2013 at the latest, in order to avoid risks which could impact the wider supply chain and would put the migration at risk."

Plenary members fully supported the ECB's recommendation that payment service users should aim to complete migration at the earliest stage possible, taking into consideration also that availability of external resources offered by banks and other service providers - including testing facilities - will be stretched to the limit towards the end of the year. Plenary members reiterated that public authorities in the euro area responsible for enforcing compliance with the Regulation should significantly step up their communication efforts, with particular regard to SMEs and public administrations on the legal obligation to meet the 1 February 2014 deadline. These communication efforts should indeed be supported by the political drivers of the programme - such as EU governments - promoting EU integration. Article 10 of the Regulation details how this legislative act is to be enforced. It clarifies that EU Member States must designate the competent authorities responsible to ensure compliance with this regulation (see link to European Commission Website below to see the list of designated authorities).

For more information, refer to the article, entitled: ' Migration - Don't Count on a Plan B. European Central Bank publishes first Migration Report and warns against risks of late migration' in this edition of the Newsletter (see 'related articles in this issue' below). The invites all end-users and, in particular, SMEs now preparing migration to and SDD, to take advantage of the lessons learnt by payment service users who have reported on their successfully completed migration projects in the Newsletter. For more information, refer to the links included at the end of this article.

The Plenary approves the document 'Improving the Efficiency of the Handling of Cash - Cash Cycle Models' for public consultation

The current landscape for the distribution and processing of cash is characterised by differing national infrastructures. This lack of harmonisation, common approach and sharing of best practice among participants in the commercial cash cycle increases the cost of cash processing and creates inefficiencies. In 2010, the and the European Security Transport Association (ESTA) established a joint task force to identify best practice principles and, where possible, develop recommendations on how to further improve deploying and re-circulating cash in . The considerations of this task force are reflected in the document 'Improving the Efficiency of the Handling of Cash - Cash Cycle Models'. It aims to create awareness among participants in the commercial cash cycles established at national level of how to improve existing processes and reduce the overall cost of cash. The Plenary approved publication of this document for a three-month public consultation, which was launched on 15 April 2013. For details on how to participate in the consultation, refer to the link ' Public Consultation: Improving the Efficiency of the Handling of Cash - Cash Cycle Models' included with the 'related links' at the end of this article. All stakeholders are invited to provide feedback by 14 July 2013. For more information, refer also to the article, entitled: 'What's Your View? Launches Public Consultation: Improving the Efficiency of Cash Handling in ' in this edition of the Newsletter (see 'related articles in this issue' below).

The Plenary resolves to seek confirmation from the Council on whether there is market demand for an SDD Fixed Amount Scheme

National direct debit instruments without a refund right for authorised transactions exist in a number of countries and are used for specific services and products. The consumption of such services or products happens immediately at the moment of the purchase of the service or product. The specific nature of these goods or services makes a physical return to the supplier of such product or service very difficult or even impossible. Examples are the purchase of digital content on the internet, public transport cards or mobile phone credit. No comparable direct debit instrument at level is however available for the various customer groups. This will reduce the available choice of payment instruments as of February 2014. When a customer wishes to use a direct debit payment method to purchase these types of services or products, the Scheme does not provide a reassuring certainty of funds for the provider of such services or products as the Scheme provides an eight-week "no questions asked" refund right for authorised transactions1. Given this particular feature of the Scheme, the supplier may be less inclined to use the Scheme, thereby affecting the availability of convenient payment instruments for customers across .

The service and product providers of those countries that are familiar with a no-refund direct debit instrument for authorised transactions wish to continue using such specific payment instrument beyond February 2014 in in order to maintain the viability and continuity of their business without generating risks (and costs). It would further allow them to continue using an efficient, economical instrument which is known, accepted and convenient for their customers. During the 2010 public consultation of the draft SDD Fixed Amount (FA) Rulebook previously developed by the , which included no right for refund for authorised transactions, several sectors from various countries had already indicated to the their interest in having such an additional SDD scheme. At that time, it was reported that such scheme would be useful for the following services and products:

Belgium

Insurances, certain types of cheques.

Denmark

Insurances, direct consumables, entertainment tickets (concerts, movies), lottery.

Greece

Insurances, financial leasing.

Ireland

Insurances, lottery, fixed mortgages, charitable donations, club subscriptions.

Italy

Fixed mortgages, capital accumulation plans, fixed amount revolving credit, contributions in investment funds, public sector collections.

Latvia

Financial leasing, utility payments.

Netherlands

Lottery, tax payments, mobile phone top-ups, public transport, tuition fees.

Spain

Insurances, tax payments, rent payment, credit repayments.

 

The refund right for authorised transactions included with the Scheme was considered to be incompatible with the nature of these services and products. In addition, the following countries have reported the current volume of local legacy direct debits without a refund right:

  • Netherlands: the volume of such specific direct debits represents six percent of the total volume of all local legacy direct debits - but cover less than 0.01 percent of total direct debit-related complaints.
  • Spain: on a yearly basis, the national tax authority collects 50 million direct debits and the social security treasury 120 million direct debits without a refund right.
  • Italy: the volume of direct debits without a refund right is about 10 percent of all direct debits collected.

Several sectors interested in such scheme or being familiar with a similar national scheme now expect the to develop a scheme for their specific needs. Such an SDD Scheme would support the migration of these local legacy direct debits to the technical requirements.

The adoption of the Regulation and in particular its Article 5 §3 (d) (ii), guarantees an adequate level of consumer protection in case of payment schemes that do not provide the right to a refund. Article 5 §3 (d) (ii) stipulates that for payment schemes that do not provide the right to a refund, the debtor (payer) must have the right to instruct the debtor bank to verify each direct debit transaction, and to check whether the amount and periodicity of the submitted direct debit transaction is equal to the amount and periodicity agreed in the mandate, before debiting the account of the debtor. Article 5 §6 further outlines that where the framework agreement between the debtor and the debtor's payment service provider () does not provide for the right to a refund, the debtor's has to verify each direct debit transaction to check whether the amount and periodicity of the submitted direct debit transaction are equal to the amount and periodicity agreed in the mandate before debiting the debtor's payment account, based on the mandate-related information. With these explicit legislation specifications, it is considered that robust measures are in place for consumers. As the Regulation clearly defines specific requirements to be followed by for payment schemes that do not provide the right to a refund, these stipulations facilitate the introduction of a payment scheme without refund right if there is a wish from stakeholders to have such a scheme.

As there is clearly some market demand for the implementation of the SDD FA Scheme and the Regulation has introduced new consumer protection measures, the Plenary resolved to request advice from the Council on the next steps for the implementation of the SDD FA Scheme. The Council, which brings together representatives of both the demand and supply sides of the payments market including the , was established by the European Commission and the ECB in June 2010 (for information, refer to 'related links' below).

Should the Council confirm the 's understanding regarding the existence of market demand for the SDD FA Scheme, the would start to develop a further version of the existing draft SDD FA Rulebook and launch a three-month public consultation. Based on the comments received with this public consultation, the draft SDD FA Rulebook could then be finalised.

Javier Santamaría is the Chair of the .

  

Related links:

European Central Bank Publishes First SEPA Migration Report and Warns Against Risks of Late Migration

European Commission Website: Competent Authorities Responsible for Ensuring Compliance with Regulation (EU) No 260/2012 (Article 10)

Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009

The EPC Migration Tool Kit: Get Ready for SEPA by 1.2.2014. Act Now!

EPC Public Consultation: Improving the Efficiency of the Handling of Cash - Cash Cycle Models

SEPA Council Page of the European Central Bank

 

Related articles in this issue:

SEPA Migration - Don't Count on a Plan B. European Central Bank publishes first SEPA Migration Report and warns against risks of late migration

Learn to Love SEPA: the 1 February 2014 Migration Deadline Mandated by European Union Law Will Not Go Away. The focus must now be on joining forces to ensure that every market participant in the euro area required to achieve SEPA compliance will meet this deadline

If You Have Not Migrated to SEPA Yet - Get Ready and Get Inspired: SEPA Pioneers on the Demand Side Share Best Practice. The SEPA deadline will not move from 1 February 2014 so act today to ensure your compliance

UNION TANK Eckstein GmbH & Co. KG (UTA): "SEPA Credit Transfer and SEPA Direct Debit Allow Everyone to Do More and Better Business across Europe". This company looks forward to 1 February 2014 when migration to SEPA will be completed in the euro area

What's Your View? EPC Launches Public Consultation: Improving the Efficiency of Cash Handling in SEPA. Stakeholders are invited to feedback on possible future cash cycle models by 14 July 2013

 

Related articles in previous issues:

EPC Newsletter Articles Published in the Section 'EPC Latest News'. Each edition of the EPC Newsletter reports on main decisions taken by the EPC Plenary  


1 The SDD Schemes allow a creditor (biller) to collect funds from a debtor's (payer's) account, provided that a signed mandate has been granted by the debtor to the creditor. A mandate is signed by the debtor to authorise the creditor to collect a payment and to instruct the debtor's bank to pay those collections.



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