November 2010: Mandatory Reachability for cross-border Direct Debits

November 2010: Mandatory Reachability for cross-border Direct Debits

Commission services publish guidance note on application of Article 8 of Regulation (EC) No 924/2009

29 April 10

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Article 8 of Regulation (EC) No 924/2009 establishes mandatory reachability for cross-border direct debits

Article 8 (1) of Regulation (EC) No 924/2009 (see link below) states that a "payment service provider of a payer reachable for a national direct debit transaction denominated in euro on the payment account of that payer shall be reachable, in accordance with the direct debit scheme, for direct debit transactions denominated in euro initiated by a payee through a payment service provider located in any Member State." Article 8 (2) further establishes that paragraph 1 shall only apply to direct debit transactions which are available to consumers under the direct debit scheme; Article 8 (3) mandates that payment service providers shall comply with the requirements of paragraphs 1 and 2 by 1 November 2010.

Article 8 (4) specifies that "notwithstanding paragraph 3, payment service providers located in a Member State which does not have the euro as its currency shall comply with the requirements of paragraphs 1 and 2 for direct debit transactions denominated in euro by 1 November 2014. If, however, the euro is introduced as the currency of any such Member State before 1 November 2013, the payment service provider located in that Member State shall comply with the requirements of paragraphs 1 and 2 within 1 year of the date on which the Member State concerned joined the euro area".

Guidance of the Commission services on application of article 8 of Regulation (EC) No 924/2009 to branches of credit institutions inside and outside the euro area

On 22 April 2010 the Commission services issued a "Note on Application of Article 8 of Regulation (EC) No 924/2009 - Reachabillity for Direct Debit Transactions" (see link below). The Commission services' note clarifies that the "interpretation of Community Law provided in this note is without prejudice to any future findings by the Court of Justice of the European Union, which is the only European Institution competent to issue binding interpretations of the EU law. This explanatory note does not represent the views of the Commission, but the Commission services, and is not, in any way, binding".

The Commission services' note on the application of Article 8 of Regulation (EC) 924/2009 specifically considers how to apply the reachability application to branches of:

  1. credit institutions with head office located in the euro area where the branches are located outside the euro area;
  2. credit institutions with head office located outside the euro area where the branches are located in the euro area, and;
  3. credit institution with head office located outside the European Union where the branches are located in the euro area or outside it.

The Commission services' note states that "branches" as defined in Directive 2007/64/EC (the 'PSD') and Directive 2006/48/EC (the 'CRD') form an integral part of the parent company and have no legal personality. The Commission services further state that according to the new text of Article 1 (1) (a) of the PSD, as amended by Directive 2009/111/EC, every branch, located in the , of a credit institution having their head office inside or outside the is now qualified per se as a "payment services provider" within the meaning of that Directive.

The Commission services conclude that therefore, according to the new Article 1 (1) (a) of the PSD, read in conjunction with Articles 2 (4) and 8 (3) and (4) of Regulation (EC) No 924/2009, the deadline to apply the reachability obligation to branches (1 November 2010 or 1 November 2014) of credit institutions is determined by the location of the branch (inside or outside the euro area), regardless of the location of the parent company. The Commission services argue that in this respect the equal treatment between third country branches and EU branches is ensured by the clear wording of Article 1 (1) (a) of the PSD, which does not differentiate between branches of credit institutions heaving their head office inside or outside the EU.

According to the interpretation of the Commission services, the deadline for the application of the reachability obligation to branches of credit institutions under Article 8 (1) is determined only by the location of the branch (inside or outside the euro area), regardless of the location of the parent company. Furthermore, no distinction should be made between the branches with head office located outside the EU and those with head offices inside the EU.

Applications for adherence to the Core Direct Debit Scheme in readiness of 1 November 2010 must reach the by 10 September 2010

Payment services providers seeking adherence to the Core Direct Debit Scheme () in readiness of 1 November 2010 must submit their application for adherence to to the Secretariat by 10 September 2010, the latest. Information on the adherence process including the relevant documentation as well as the contact information of the relevant National Adherence Support Organisation (NASO) can be obtained following the link below.

Kevin Brown is the Chair of the Legal Support Group.


Related links:

Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001

European Commission: Note on Application of Article 8 of Regulation (EC) No 924/2009 - Reachabillity for Direct Debit Transactions

Information for payment service providers seeking adherence to the SEPA Core Direct Debit Scheme

 

Related article in previous issue:

A mixed Bag. European Parliament approves revised Regulation 2560/2001 on cross-border payments ( Newsletter, Issue 2, April 2009)

 

1 Following publication of the article "A mixed Bag. European Parliament approves revised Regulation 2560/2001  on cross-border payments" in issue 2 of the Newsletter (April 2009), the EU legislator decided to put in place Regulation (EC) No 924/2009 repealing Regulation (EC) No 2560/2001 rather than publishing a revised version of Regulation (EC) No 2560/2001. The contents of the article "A mixed Bag. European Parliament approves revised Regulation 2560/2001 on cross-border payments" thus reflect the provisions of Regulation (EC) No 924/2009.



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