Communication Rules for Payment Services and E-Money Sectors

The FCA published a Policy Statement (PS 19/3) extending certain rules and guidance to the payment services and e-money sectors. This Policy Statement follows an August 2018 Consultation Paper (CP 18/21) to which only 19 organisations responded. In the consultation the FCA proposed the application of the Principles for Business (the Principles) to these sectors, as well as to registered account information service providers. The Principles set out the high-level standards regulated firms are expected to comply with. The Principles deal with, among other things, how firms should treat their customers, run their business, and interact with the regulator. The consultation also proposed rules to address concerns related to communication practices, including misleading advertising and marketing of services.

The reasons behind the proposals were to help both firms and customers understand the expected standards of behaviours, and to ensure a more efficient intervention action from the FCA where there is potential customers’ detriment. The FCA acknowledges that the payment services and e-money sectors are evolving and innovating at a fast pace, therefore believe it is important to set more prescriptive standards.

PS 19/3 confirmed the extension of the application of all the Principles (except Principle 4 – Financial Prudence) to payment institutions and electronic money institutions, in an appropriate and proportionate manner to firm size, and in conjunction with adequate systems and controls in place as well as effective record keeping, in line with Payment Services Regulations 2017 and Electronic Money Regulations 2011.

Certain communication rules and guidance in the Banking Conduct of Business Sourcebook, Chapter 2 (BCOBS 2) are to be applied to communications with payment service and e- money customers. Rules in BCOBS 2 expand on Principle 6 (treating customers fairly), and Principle 7 (paying due regard to the information needs of customers, and communicating information to them in a way which is clear, fair, and not misleading). The FCA believes this will enhance competition, by ensuring that consumers are correctly informed, and choose the best service for their needs. New rules will also apply to transfer services provided as part of a payment or e-money services, and will prevent providers from promoting unachievable exchange rates and making unproved comparisons about the costs of other service providers.

The new rules and guidance will apply from 1 August 2019 which gives firms six months to review their current practices and make any necessary changes. Concerns were raised by some respondents in relation to this timeframe, which could coincide with the UK’s withdrawal from the European Union; nevertheless, the FCA confirmed they believe this implementation period is proportionate. The FCA committed to develop good practice examples, which will expand the guidance provided in some sections of the PERG chapter in the FCA Handbook.

Firms affected by these changes should keep in mind that the FCA typically relies upon a breach of a Principle as a sufficient basis for a supervisory or enforcement action against a firm.

If you have any questions about the new rules or need assistance to reach a fully compliant position by 1 August 2019, please do not hesitate to contact us.