Recap: who does what with regard to Credit Transfer () and SEPA Direct Debit (SDD)?
With the introduction of the euro currency in 1999, the European Union (EU) governments and EU institutions driving the SEPA process expected the banking industry to contribute the resources required to develop European instruments for electronic euro payments. In response to these expectations, the European banking sector created the European Payments Council () in 2002. (The EPC is an international not-for-profit association which makes all of its deliverables available to download free of charge on the EPC Website. The EPC is not part of the EU institutional framework and therefore, has no role in the adoption of EU legislation or other regulatory initiatives establishing SEPA compliance requirements.)
The role of the EPC: in close dialogue with the stakeholder community, the EPC developed, among other things, the SCT and SDD Schemes. The SEPA payment schemes, as set out in the SCT and SDD Rulebooks, continue to evolve based on a transparent change management process which provides any interested party with the opportunity to participate. This evolution reflects changes in market needs and updates of technical standards developed by international standards bodies, such as the International Organization for Standardization. It is important to keep in mind that the EPC carries out the scheme management function subject to legal and regulatory conditions defined by the EU authorities.
The role of the European Commission and the EU co-legislators: the SCT and SDD Schemes must comply with the relevant requirements set out in Article 5 of, and in the Annex to, the ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the SEPA Regulation) adopted by the EU co-legislators, i.e. the European Parliament and the Council of the EU representing EU governments, in February 2012. Article 13 of the SEPA Regulation empowers the European Commission to amend the technical requirements detailed in the Annex to the Regulation through delegated acts. (For detailed information, refer to the EPC Newsletter article, entitled ‘Evolution and Oversight of the SCT and SDD Schemes: the Role of the European Commission and of the European Central Bank’.)
The role of the European Central Bank (ECB): on 1 August 2014, the ECB commented in a press release: “Today marks a major milestone in the integration of retail payments in Europe. After 15 years of work, (…) SEPA has been successfully implemented for credit transfers and direct debits in the euro area. (…) The Eurosystem, which consists of the ECB and the national central banks of euro area Member States, has monitored the migration to and implementation of SEPA from its inception, facilitating open dialogue between all parties (banks, corporates, consumers, public authorities, governments and SMEs). This approach has contributed to the successful completion of SEPA for credit transfers and direct debits in the euro area, constituting one of the largest financial integration projects in the world.”1 Going forward, the evolution of the SCT and SDD Schemes, among other things, will also be addressed by the Euro Retail Payments Board, chaired by the ECB.
The composition and mandate of the Euro Retail Payments Board ()
In 2010, the European Commission together with the ECB established the SEPA Council, which brought together representatives from both the demand and supply sides, including the EPC, with a view to promoting the realisation of an integrated euro retail payments market by ensuring high level stakeholder involvement. On 19 December 2013 the ECB announced the launch of the ERPB, which replaces the SEPA Council. The ERPB will “help foster the development of an integrated, innovative and competitive market for retail payments in euro in the EU”.
The ECB points out that the ERPB’s composition and mandate are “broader than those of its predecessor”. Seven representatives from the demand side (e.g. consumers, retailers and corporations) and seven from the supply side (banks and payment and e-money institutions) sit on the Board (compared with five each on the SEPA Council). They are joined by five representatives from the euro area national central banks and one representative from the non-euro area EU national central banks (all on a rotating basis). The ERPB is chaired by the ECB. The European Commission is invited to join as an observer. The ERPB’s work will consist mainly of identifying strategic issues and work priorities (including business practices, requirements and standards) and ensuring they are addressed. (The EPC is a member of the ERPB.) Following its first meeting on 16 May 2014, the ERPB published a statement setting out its work plan for the period 2014 through 2016.
At that meeting the ERPB agreed on the creation of two working groups which were asked to deliver their results for the second meeting of the ERPB to take place in December 2014. It also held a discussion on an alternative direct debit scheme in SEPA that did not include the unconditional right to refunds.
These three items are described in further detail below.
ERPB working group on SCT and SDD post-migration issues
On 1 August 2014, the ECB pointed out that with migration to SCT and SDD complete, “every month more than 2 billion payments will now flow across the euro area in new standardised formats.” Market participants across the euro area confirmed that the transition went very smoothly. EuroTreasurer, for example, commented: “There have been no public complaints about problems with SEPA transactions, and banks and corporate treasurers that EuroTreasurer has been in contact with did not report any difficulties due to the deadline.”2
To ensure that any implementation and functioning issues which might prevent the SEPA payment schemes from delivering their full potential going forward, are addressed, the ERPB set up a working group on SCT and SDD post-migration issues. The working group is planning to address the following topics, among others: varying national implementations, additional optional services (AOS) and their effect on interoperability, various barriers (related to business rules) to the cross-border use of SDD, accessibility (ability to use a single payment account in the euro area), reachability of payment service providers () for SCT and SDD, the continued use of conversion services, the use and validation of creditor identifier for SDD and implementation of R-transactions. (Possible exceptions to the normal execution of a direct debit collection include refunds, returns, rejects, refusals and reversals, commonly referenced as ‘R-transactions’ and described in detail in the SDD Rulebooks. On 10 July 2014, the EPC published the document ‘Guidance on Reason Codes for SDD R-transactions’.)
The working group will gather and analyse information from relevant market participants and assess the issues in relation to their effect on the functioning of SEPA. It is not expected to deliver suggestions for SCT and SDD business requirements or for technical implementation specifications, as this is a task for the SCT/SDD scheme owner, i.e. the EPC. The working group is co-chaired by the EPC and the European Association of Corporate Treasurers (EACT) / BusinessEurope.
ERPB working group on pan-European electronic mandate solutions
The ERPB members took note of the diversity of both the existing and planned electronic mandate solutions for SDDs and the lack of pan-European solutions in the making. They agreed that there was a short-term need to clarify the rules of the SDD Schemes governing electronic mandates in a way that was more open to all types of electronic mandate solutions. With regard to a longer-term perspective, the ERPB agreed that truly pan-European electronic mandate solutions needed to be found and implemented. This made it necessary to analyse the existing barriers to cross-border integration. This work will be conducted by an ERPB working group specifically created for this purpose.
The working group is expected to put forward high level recommendations to address legal, technical or any other issues which prevent pan-European e-mandate solutions from emerging and being used. The working group will gather and analyse information from market participants (PSPs and payment service users, on both the creditor and the debtor side) for their considerations of using or not using electronic mandates both in the national and cross-border context for SDD. Following this fact-finding exercise, it will assess the issues in relation to their effect on the functioning of SEPA. The working group is not expected to deliver suggestions for SDD business requirements or for technical implementation specifications as this is a task for the SCT/SDD scheme owner, i.e. the EPC. The working group is co-chaired by the EPC and E-commerce Europe.
Alternative SDD scheme that does not include the unconditional right to refunds
The ERPB members discussed the principles outlined in a note prepared by a multi-stakeholder task force that had analysed the feasibility of an alternative direct debit scheme in SEPA that did not include the unconditional right to refunds. Although the representative of consumers stressed the importance of the unconditional right to refunds for payers, the members of the ERPB agreed that – if permitted under EU law – such a scheme could be launched provided that it followed, inter alia, the seven principles outlined by the task force. These principles are: i) ensuring full transparency to consumers; ii) limiting the list of goods or services that the scheme could be used for; iii) making collections subject to a maximum amount; iv) the consumer refund rights for unauthorised transactions remaining fully intact to ensure full consumer protection; v) making it easy for PSPs to determine which creditors are entitled to use the scheme; vi) no requirements for PSPs to check or monitor individual underlying transactions; and vii) having the potential to reach the legally defined PSP adherence threshold for a pan-European direct debit scheme. ERPB members agreed: i) to recommend to the European Commission and the EU legislators that they consider a legal solution to clarify the refund rights in the context of a review of the Payment Services Directive; and ii) that such an alternative direct debit scheme in SEPA could only be launched once the review of the Payment Services Directive was complete and thus provided a clear legal background to allow for this.
The next meeting of the ERPB is planned to take place in December 2014.
Jean-Yves Jacquelin is the Chair of the EPC SEPA Payment Schemes Working Group. Francis De Roeck is the Chair of the EPC Standards Support Group.
EPC Website: EPC publishes ‘Guidance for SEPA Direct Debit Business to Business (SDD B2B) Scheme Mandate Confirmations’ (This document is addressed to payment service providers participating in and creditors collecting payments under the Scheme.)
EPC Blog (15 April 2014): PSD2 – The New Article 67, (‘Refunds for Payment Transactions Initiated By or Through a Payee’), Proposed by the European Commission Risks Undermining Consumer’s Unconditional Refund Right for Direct Debits Included with the SEPA Direct Debit Core Scheme
EPC Website: SEPA at a Glance – the Infographic (This infographic provides an overview of the actors involved in the SEPA process at the European level and their interaction.)
Related articles in this issue:
SCT and SDD Rulebooks: Modifications to the Rulebooks to Take Effect in November 2015 and November 2016, Respectively. Based on feedback received during the 2014 public consultation on changes to the rulebooks, the EPC resolved to update the release schedule applicable to the next rulebooks generations
European Payments Council 2.0: with SEPA Migration (Euro Area) Complete, the EPC Adapts its Structure to Further Enhance Governance and Stakeholder Involvement. The new EPC governance model will become operational in the first quarter of 2015
The New European Commission: a Closer Look at President Juncker’s Vision for the EU Internal Market and Economic and Monetary Union. The European Commission will continue to play a principal role in the SEPA process going forward
Next Step to Create the Digital Single Market: EU Lawmakers Adopt the New Regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal Market. European Union authorities seek to enhance trust in electronic transactions
What Consumers and Online Retailers Want or Getting the Balance Right: Security and Simplicity in an Increasingly Mobile World. A commentary on the complexity involved in securing electronic and mobile commerce payments
Related articles in previous issue:
EPC Newsletter: Articles Published in the Section ‘SEPA Case Studies’
Evolution and Oversight of the SCT and SDD Schemes: the Role of the European Commission and of the European Central Bank. The SEPA payment schemes in the legal and regulatory context (EPC Newsletter, Issue 23, July 2014)
Join the Debate on the Further Evolution of the SCT and SDD Schemes: Less Flexibility, More Harmonisation? An overview of the options, variations, exceptions and exemptions possible in SEPA today (EPC Newsletter, Issue 22, April 2014)
Next Generation SCT and SDD Rulebooks: Three-Month Public Consultation Starts on 19 May 2014. All stakeholders are invited to provide feedback on possible modifications to the SCT and SDD Rulebooks (EPC Newsletter, Issue 22, April 2014)
1 European Central Bank press release (1 August 2014): ‘Single Euro Payments Area (SEPA) Reaches Major Milestone for Retail Payments’ http://www.ecb.europa.eu/press/pr/date/2014/html/pr140801.en.html.
2 Euro Treasurer: ‘Treasurers Use SEPA Momentum to Centralise’ http://www.eurotreasurer.com/features/road-to-sepa/treasurers-use-sepa-momentum-to-centralise/.
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