Service providers cannot restrict the option for European citizens to purchase an online good or service via a direct debit payment solely to those customers resident in the same country where the service provider itself is established, Advocate General (AG) Szpunar has recently opined. Such a pre-requisite is a clear breach of the EU’s Single Euro Payments Area (SEPA) legal framework.
The SEPA has harmonised the way electronic payments in euros are made across Europe. It permits European citizens and businesses to make and receive electronic payments in euros, including cross-border credit transfers, direct debit transfers and card payments under the same basic conditions. A single system for both domestic and cross-border bank transfers has been put in place.
In practical terms, this means that one can effect a cross-border transaction by direct debit – charging directly an account in one country for services provided in another country.
Similarly, people working or studying in a SEPA country may use an existing account in their home country to receive their salary or pay bills in the new country. Transparent pricing thanks to the single set of payment schemes and standards is yet another advantage.
The SEPA system is regulated by an EU regulation which clearly establishes the technical and business requirements for credit transfers and direct debits in euros. The said regulation specifically prohibits payees accepting a credit transfer or using a direct debit to collect funds, from specifying the member state in which the payer’s account must be located.
The raison d’ĕtre of such a prohibition is clearly in line with the objective of the SEPA system itself, namely, that of creating an integrated market for electronic payments in euros, with no distinction between national and cross-border payments.
The facts of this case were briefly as follows. Deutsche Bahn, a German railway company, allows Austrian customers to book train journeys via the internet. The company’s online payment system accepts payments by credit card, instant bank transfer or under the SEPA direct debit scheme.
However, Deutsche Bahn made the availability of SEPA direct debit transactions subject to the condition that the customer utilising this payment service resides in Germany. An Austrian consumer protection association filed an action before the Austrian courts claiming that such a restriction is in breach of the EU’s SEPA regulation, which prohibits payees from specifying the member state in which the payer’s account is to be located.
The association argued that since customers usually hold a payment account in their country of residence, the limitation imposed by Deutsche Bahn relating to residence in Germany, amounted to discrimination in breach of the EU’s SEPA regulation.
There ought to be no distinction between national and cross-border payments. Any attempt to thwart this will be halted
It argued that such a pre-requisite implied that customers wishing to utilise a direct debit form of payment must also have their payment account in Germany. The national appellate court filed a preliminary reference before the Court of Justice of the European Union (CJEU) requesting guidance as to whether the contested payment practice was in breach of the EU’s SEPA Regulation.
AG Szpunar observed that, although by imposing a residence condition, Deutsche Bahn does not explicitly require customers wishing to use the direct debit scheme to have their payment account in any particular member state, customers generally have a payment account with a service provider established in the member state where they reside. In practice, the residence pre-requisite is therefore equivalent to specifying in which member state a payment account must be located. He therefore concluded that Deutsche Bahn’s contested payment practice is in breach of the SEPA Regulation.
The AG went on to note that, in the absence of any legal provision allowing for a justification for discrimination based on the location of the payer’s account in cases of direct debits, there could be no justification for the pre-requisite imposed by Deutsche Bahn. In terms of the SEPA Regulation, a company is not obliged to offer its customers the possibility of paying by direct debit. However, the AG concluded, that once a service provider decides to provide its customers with this option, it has to offer it in a non-discriminatory manner.
The AG’s opinion is not binding on the CJEU and therefore one must await the judgment of the court for the determining outcome on the matter. Nonetheless, the objective behind the implementation of the SEPA system is clear as is the message being sent by the AG – there ought to be no distinction between national and cross-border payments and any attempt by a service provider to thwart such an objective will be halted.
Mariosa Vella Cardona, M’Jur, LL.D., is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law. She is also a visiting examiner at the University of Malta.
mariosa@vellacardona.com