Payment Services Directive

The Payments Services Directive (PSD) is quite specific when it deals with information requirements relating to payments in and from a payment account. For example, following receipt of a payment order into the account, a bank is required to provide the following information:

• A reference for identifying the payment and information relating to the payee;

• Amount of the payment in the currency used;

• Breakdown of all charges, if applicable;

• Exchange rate used, if applicable; and

• Date of receipt of the payment instructions.

A payment order must be executed within a specific timeframe, referred to as the execution time. Rapid payment is essential for a modern and properly functioning economy. Several countries already provide that national payments must be made by the end of the next business day and some even make payments on the same day.

Under the PSD, up to January 2012, parties (that is payer and his/her payment service provider) may agree on a maximum execution time of three business days for credit transfers. Furthermore, the directive allows parties to agree on an extra business day for paper-initiated payment transactions.

From January 1, 2012, the following credit transfers must be made at the latest by the end of the next business day:

• Euro currency payment transactions, both national and cross-border within the EU;

• National payment transactions in the currency of the member state concerned;

• Certain payment transactions involving conversion between the euro and the currency of a non-euro member state.

That stated, nothing stops the bank and its client from mutually agreeing to a short execution time. Once credited, funds are at the payee's disposal immediately.

The PSD introduces the 'full amount principle', according to which the full amount specified in a payment order shall be credited without any deduction to the beneficiary. Therefore, although banks may still charge for the receipt of credit transfers, the amount charged will have to be separately shown and deducted.

The directive does not go into the merits of how much a payment order should charge for a payment in or out from an account. As long as the applicable fees and charges are made known prior to the transaction, a payment provider is at liberty to set any level of tariff.

The payee and his payment service provider may agree that the latter deducts its charges from the amount received before crediting it to the payee's account. In such cases, the full amount of the payment and the charges deducted must be shown separately in the information given to the payee.

This information was provided by Anna Cutajar Paris, from the Consumer Complaints Unit, Malta Financial Services Authority. For more information about this subject and for more consumer issues on financial matters, call the Consumer Complaints Unit on freephone 80074924 or visit http://mymoney box.mfsa.com.mt