PHILIP

The Payment Services Act which came into force on 1 November 2009 is applicable to payment services and payment substitutes.
 
The Act implements the Payment Services Directive, Directive 2007/64/EF of 13 November 2007 on payment services in the internal market, amends Directive 97/7/EF, 2002/65/EF, 2005/60/EF and 2006/48/EF, and repeals Directive 97/5/EF, the objective of which is to establish an internal market for payment services and thereby make the payment system within the EU more efficient.
 
In connection with the coming into force of the Act, the Act on Certain Means of Payment was repealed as the provisions of the act have now been incorporated into the Payment Services Act.

If your business is offering payment services, you shall therefore consider if your business is in possession of the necessary permissions, and should the new law give rise to a review of the procedure in your business and the terms for payment services, Philip Law Firm is ready to assist your business.

Scope of application

The Payment Services Directive regulates both the payment services which were previously subject to the Act on Means of Payment and other types of payment services as e.g. transfers from account to account, payment transfers, and deposits of cash into or withdraw from a payment account. As the Payment Services Act implements the Payment Services Directive, the regulation of the payment services in Denmark has thereby been extended.
 
With the Payment Services Act a new system has been introduced according to which it is necessary to obtain the permission of the Danish Financial Supervisory Authority to provide payment services. In the former Act on Means of Payment only registration of the provider was a requirement.
 
The concept of ”payment services” has been further defined in annex 1 to the Act, from which it appears inter alia that a payment service can be a bank card transaction, transactions with international credit cards or payment by use of a mobile or other digital or IT device, e.g. internet payment via a computer.
 
In addition to payment services the Act also controls payment with payment substitutes which are characterized by being electronic systems used to acquire goods and services without the existence of a payment service. A payment substitute can for instance be a card for electronic reading containing a claim against anything else than money, e.g. a SIM-card of a mobile or an electronic card to go by bus or visit swimming baths. Payment substitutes will typically be prepaid claims but can, however, also be paid in arrears. 

Providers of payment services

The Payment Services Act states that credit institutions, payment institutions, electronic money institutions, Denmark’s central bank and public authorities may provide payment services on the condition that permission has been obtained in Denmark, in another country within the EU or in a country with which the EU has entered into an agreement for the financial area.
 
The Payment Services Act has as a new service introduced the ”payment institution” meaning providers which are not banks but providers of payment services as e.g. PBS A/S. The payment institution’s permission to offer payment services is more limited than for example that of the credit institution as payment institutions may neither receive deposits nor issue electronic money. It is possible for a payment institution to obtain permission for one or more kinds of payment services.
 
In order for a payment institution to obtain permission to offer payment services a number of requirements must be met, i.e. the legal form of the undertaking, initial capital, aptitude and integrity of the management, the owners, etc.
 
Providers who prior to 25 December 2007 have commenced business requiring permission as a payment institute may continue their business until 20 April 2011. Since 1 November 2009 the provider has, however, had to comply with the rules of conduct, rights and obligations stated in the Payment Services Act.
 
Furthermore, it is possible to obtain a limited permission from the Danish Financial Supervisory Authority to offer payment services in Denmark if the provider of payment services has been exempted from the Payment Services Directive.
 
In order to obtain a limited permission the provider has to meet certain requirements. These requirements will be similar to those mentioned above in connection with the permission of the payment institutions, but in the event of a limited permission the requirements are less strict.
Furthermore, it is a requirement to obtain a limited permission that either only payment services based on payment instruments with a limited application are offered, e.g. petrol cards, catering cards or member cards with a payment function or that payment services are offered, provided that the average of the total payment transactions conducted by the provider in question for the preceding 12 months do not exceed Euro 3 million per month.
 
Providers who prior to 25 December 2007 have commenced business requiring a limited permission may continue their business until 25 December 2010. Since 1 November 2009 the provider has, however, to comply with the Act’s rules of conduct, rights and obligations. 

Providers of payment substitutes

There is no requirement from the Danish Financial Supervisory Authority to issue payment substitutes. However, the provider has to notify the issuance of payment substitutes to the Consumer Ombudsman; the issuance must not take place before the notification has taken place.
 
Providers of payment substitutes who have notified the Consumer Ombudsman before the 1 November 2009 are not required to make a new notification unless amendments to the notification have been made.
 
In connection with the notification the provider shall give information about the name of the provider, business address, corporate form as well as the payment substitute. The business address of the provider shall be in Denmark, in another EU country or in a country with which the EC has entered into an agreement for the financial area. 

Prior information

To strengthen the transparency for the individual user when choosing among the payment services offered the Payment Services Act has introduced more strict requirements to provide information compared to the Act on Means of Payment.
 
When concluding a framework agreement, e.g. agreements on direct charges, agreements on use of payment instruments, net bank agreements and agreements on opening of payment accounts or when concluding a payment transaction comprised by a framework agreement, the provider has - at the latest when the framework agreement is concluded - to inform the user about inter alia name of the provider, use of payment services, charges, interest, rates of exchange and means of communication. In the event of a consumer agreement on distance sale of a financial service, the provider also has to submit further information to the user pursuant to the Consumer Agreement Act.
 
The information shall be in writing – on paper or some other durable medium. It is not possible to demand payment for supply of information which the provider is obliged to give according to the law.
 
In the event of a one-off payment transaction which is not governed by a framework agreement, e.g. depositing of cash into the account of a third party or placing of an order of payment, the provider shall prior to the one-off transaction make certain information available to the user. The provider is thus obliged to state the maximum execution time of the desired payment service, charges and rates of exchange or rate of reference which shall apply to the payment transaction.
 
In case of consumer agreements on payment services relating to distance sale of a financial service the provider is also obliged to make particulars available to the consumer pursuant to the Consumer Transaction Act.
 
In case of one-off payment transactions it is possible to communicate the disclosure requirements verbally to the user, by a notice at the business premises or by placing a computer from which the information is made available to the user as information in writing is not required. Should the user, however, demand the information to be on paper or some other durable medium, his request shall be met. 

Execution time and value date

A provider shall ensure that the amount of a payment transaction is placed to the credit of the payee’s account at the latest at the end of the first succeeding working day after the date of receipt.
 
As far as value is concerned, i.e. start and discontinuation of computing of interest, the Payment Services Act introduces rules for this as the problem of value has not previously been regulated by Danish law or EC law.
 
Pursuant to the Payment Services Act the payee is as a starting point thus entitled to the interest rates of the received amount from the date of deposit into the account of the payee. If the amount is received after close of a working day or on a non-working day, rates of interest will accrue from the first succeeding working day.
 
If, on the contrary it is a question of charge, the value date must not be earlier than the point in time when the account is debited. In that way there is identity between the date when the amount is withdrawn from the account and the date when computing of interest is discontinued.  

Charges

The Payment Services Act continues the rules of charges from the Act on Certain Means of Payment which was carried by a large majority of the Danish Parliament when reaching the Dankort compromise in 2005.
 
A payee, e.g. a shop, is thus not allowed to charge a fee from a payer in a physical trade when the payer uses a payment instrument as for instance a cash card or a payment card.
 
Furthermore, every business when fixing its charges for transactions with payment instruments, e.g. towards card owners, must not charge unreasonable prices and profit margins. This means prices and profit margins which are greater than those which would apply under effective competition.   

Liability regulations

The Payment Directive contains liability regulations corresponding to the Danish liability regulations which were applicable to the Act on Means of Payment. It has therefore been decided to continue these regulations in the Payment Services Act.
 
In this way, as a consequence of the misappropriation of a payment instrument by a third party, e.g. a cash card or payment card, a loss will as a starting point result in the provider being liable for the loss unless one of the exemption clauses of the law is applicable.
 
In the event of an unauthorised transaction to which a payer has not agreed, the provider of the payment services is liable to the payer for the loss as a consequence of the transaction. In this case the provider shall immediately repay the amount to the payer.