EUROPEAN PARLIAMENT
1999
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2004
Session document
FINAL
A5-0192/2004
18 March 2004
REPORT
on a legal framework for a single payment area
(2003/2101(INI))
Committee on Economic and Monetary Affairs
Rapporteur: Alexander Radwan
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CONTENTS
Page
PROCEDURAL PAGE .............................................................................................................. 4
MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION ............................................ 5
EXPLANATORY STATEMENT.............................................................................................. 9
OPINION OF THE COMMITTEE ON LEGAL AFFAIRS AND THE INTERNAL
MARKET ................................................................................................................................. 13
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PROCEDURAL PAGE
At the sitting of 5 June 2003 the President of Parliament announced that the Committee on
Economic and Monetary Affairs had been authorised to draw up an own-initiative report
under Rule 163 on a legal framework for a single payment area (2003/2101(INI)) and the
Committee on Legal Affairs and the Internal Market had been asked for its opinion.
The Committee on Economic and Monetary Affairs had appointed Alexander Radwan
rapporteur at its meeting of 9 April 2003.
The committee considered the draft report at its meetings of 17 February and 16 March 2004.
At the last meeting it adopted the motion for a resolution by 14 votes to 11, with 0
abstentions.
The following were present for the vote: Christa Randzio-Plath ( chairwoman), Philippe A.R.
Herzog (vice-chairman), John Purvis (vice-chairman), Alexander Radwan (rapporteur), Hans
Udo Bullmann, Jonathan Evans, Carles-Alfred Gasòliba i Böhm, Robert Goebbels, Lisbeth
Grönfeldt Bergman, Christopher Huhne, Christoph Werner Konrad, Astrid Lulling, David W.
Martin, Hans-Peter Mayer, Fernando Pérez Royo, Bernhard Rapkay, Mónica Ridruejo, Peter
William Skinner, Helena Torres Marques, Bruno Trentin, Bert Doorn (for Othmar Karas),
Werner Langen (for Ingo Friedrich), Thomas Mann (for Generoso Andria), José Javier Pomés
Ruiz (for José Manuel García-Margallo y Marfil), Ieke van den Burg (for Pervenche
Berès),Harald Ettl (for Mary Honeyball), Simon Francis Murphy (for Giorgos Katiforis).
The opinion of the Committee on Legal Affairs and the Internal Market is attached.
The report was tabled on 18 March 2004.
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MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION
on a legal framework for a single payment area
2003/2101(INI))
The European Parliament,
– having regard to the Commission communication 'New Legal Framework for Payments in
the Internal Market' of 2 December 2003 (COM(2003) 718),
– having regard to the European Central Bank's progress report 'Towards a Single Euro
Payments Area' of 26 June 2003,
– having regard to the European Payments Council White Paper 'Euroland: Our Single
Payment Area' of May 20022,
– having regard to a hearing of experts on 20 January 2004,
– having regard to Rule 163 of its Rules of Procedure,
– having regard to the report of the Committee on Economic and Monetary Affairs and the
opinion of the Committee on Legal Affairs and the Internal Market (A5-0192/2004),
A. whereas the reliable and efficient processing out of all cross-border payment transactions
in the European Union is essential for completion of the internal market and, therefore, a
single euro payments area should, as far as possible, be achieved before the banking
industry's 2010 target date,
B. whereas, in particular since the European Payments Council was set up in 2002, the
European banking industry has made major efforts to press ahead with the notion of a
single payment area; whereas, however, putting plans into practice, such as, for instance,
the implementation of agreed standards, is still causing difficulties,
C. whereas the situation as regards cross-border retail payments in the EU continues to be
unsatisfactory and citizens making cross-border payments continue to face difficulties
which they do not face with purely national transactions,
D. whereas a coherent legal framework for retail payments is needed at European level
which incorporates and consolidates the host of existing rules, eliminates legal
uncertainty and inconsistencies and closes regulatory gaps,
E. whereas, following EU enlargement, the legal framework will have to encompass more
national systems and procedures and the accession countries will introduce the euro in a
number of years' time at the earliest,
1.
2
Welcomes the Commission's initiative to establish the legal prerequisites for establishing
a single retail payments area in the European Union; points out, however, that
http://www.europeanpaymentscouncil.org/
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Community rules should be formulated in such a way that the efficiency of national
systems and procedures is not impaired;
2.
Considers that customers must be provided with a set of convenient, cheap, reliable and
predictable instruments of payment;
3.
Calls on the Commission to produce economic studies at an early date with a view to
clarifying what is at stake and what options might be pursued as regards, among other
things, infrastructure, interoperability, and interbanking;
4.
Considers, given that the current situation regarding the European payment area is
unsatisfactory, that at the technical level the necessary legal measures must be taken in
order to establish an efficient, effective European payment system;
5.
Maintains that the above implies that the Union institutions should clearly lay down the
aims and the implementation schedule and that economic stakeholders should monitor
implementation;
6.
Takes the view that prudential rules governing payment service providers should be made
more uniform on a Europe-wide basis in order to ensure a level competitive playing field;
takes the view that further fragmenting of prudential supervision provisions or a lowering
of prudential supervision standards must be prevented; takes the view that, in the interest
of all parties concerned (consumers, merchants, and banks), a new payment service
provider status must not lead to a deterioration in the physical, prudential, financial, and
economic security of the means of payment released onto the market;
7.
Calls on the Commission to keep an extremely close eye on concentration trends among
payment service providers; notes that in some areas, e.g. credit cards, the market is
dominated by a small number of firms; takes the view that the provision of payment
services (money transfers, overdraft facilities) requires a high degree of expertise and
responsibility in relation to consumers, implying that payment services should be
provided to retail clients only by officially supervised firms;
8.
Welcomes the Commission's intention to include both cross-border and national
payments in the legal framework; calls for the scope of the legal framework to be
extended from 2006 to all intra-EU euro payments of up to EUR 50 000; calls for
uniform rules governing transactions in other EU currencies;
9.
Considers it necessary to promote the legal certainty and technical security of payments
in the euro zone, given that consumers are entitled to expect that they will be protected to
the same degree on the internal market as they are in their countries of origin;
10. Welcomes the intention of the European banking industry and of the Commission to
establish a pan-European direct-debit scheme;
11. Maintains, as regards the bank card sector, in which cross-border operation is far more
satisfactory, that one priority must be to introduce second-generation smart cards across
the board, without falling behind the schedule laid down, in order to make such cards
safer to use throughout the Union;
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12. Regards it as essential that bank customers be given the most important information in a
succinct, comprehensible form; regards the very extensive information requirements
proposed by the Commission as excessive and impracticable as they stand, however;
13. Regards the promotion of customer mobility as essential in the interests of proper
competition; calls on the banking industry to submit proposals for a standardised data
communications procedure (e.g. standing orders, direct debits) in order to make it easier
for customers to move accounts; rejects European provisions on maximum charges for
closing accounts and insists, rather, on full transparency concerning those charges;
14. Advocates, in the interests of legal certainty and cost-efficient processing of payment
orders, early irrevocability (i.e. before a transfer has been initiated) of payment orders
which are directly made to a payment service provider (e.g. transfers); calls in the case of
direct-debit payments, however, for the possibility of revoking them over a longer period,
in particular where the amount to be paid cannot be specified by the customer when the
payment order is placed;
15. Welcomes the objective of promoting EU-wide distance commerce and Internet selling;
rejects making payment service providers accountable in the event of merchant-customer
disputes, however, whether through liability rules or extended cancellation rights for
customers; insists, rather, on clear demarcation between the basic transaction and
payment; takes the view that the development of (optional) safeguard systems (e.g. via
escrow accounts) should be left to the market;
16. Takes the view that a payment service provider should be responsible for the accurate
execution of a payment order under the Member States’ national laws, and be required to
prove that it has been, as soon as the customer’s order has entered his domain; rejects any
extension of strict liability; is of the opinion, however, that within the legal relationship
with his customer as regards errors of selection, the liability of a provider should also
extend to other firms in the chain and technical facilities used by him; suggests that,
through self-regulation, banking associations, network operators and merchants should
adopt a procedure for clarifying internal liability questions promptly; takes the view that
an appraisal of liability questions in connection with consequential damage and force
majeure should be left to national jurisdictions;
17. Rejects provisions to restrict the personal contribution by customers to EUR 150 in the
event of unauthorised transactions (e.g. where a credit card is stolen) where they have
failed to comply with their duty to give notification; insists, rather, that the customers'
personal responsibility should be encouraged and that there should be arrangements
enabling any payment card to be blocked throughout the EU by establishing a single EUwide telephone number;
18. Calls for the legal framework to enshrine the principle that, whatever means of payment
is used, the full amount specified in the payment order must be credited to the recipient’s
account without deductions unless the recipient has expressly entered into a different
arrangement with his bank, in which case the amount and type of deduction must be
disclosed to the recipient;
19. Welcomes the Commission proposal, regarding Special Recommendation VII, to define
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the EU as an integrated legal framework; takes the view, however, that threshold values
should be introduced for cash transfers; notes that ‘effective risk-based procedures to
identify any transfers which lack the required originator information’ are technically
impossible to achieve;
20. Urges the banking industry to enhance on-line banking security continually, in
collaboration with the IT industry and supervisory authorities, and to give customers
comprehensible information about risks and precautions to be taken;
21. Welcomes any alternative dispute resolution arrangements that might help to avert
protracted litigation; considers that if voluntary dispute resolution fails to settle disputes
quickly and cannot secure effective complaint and redress procedures for consumers,
dispute resolution arrangements should be made compulsory in the EU Member States
and at European level;
22. Instructs its President to forward this resolution to the Council and Commission.
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EXPLANATORY STATEMENT
1. Need for efficient payment systems in the internal market
The declared objective of all players in the European Union is to complete the internal
market, with a view to ensuring a cross-border flow of goods, services and capital plus a high
level of worker mobility. In a number of respects in this connection, efficient payment
services at European level are of major importance:

as a rule, for every exchange of goods and services there is a corresponding payment in
return;

completion of the internal financial market requires efficient payment systems;

payments form the basis for cross-border investment and securities transactions and as
such are a prerequisite for capital mobility.
Last but not least, reliable and efficient payment systems foster public confidence in the
currency and contribute towards financial system stability.
2. Cross-border retail payments: the situation now
The introduction of euro coins and notes at the start of 2002 has significantly helped to make
cash payments more efficient. A more discriminating look needs to be taken at the position
concerning non-cash payments:

Interbank payments flow smoothly; the TARGET large-value payments system operated
by Eurosystem has contributed towards this in particular.

The situation concerning European retail payments is not satisfactory, however. Although
all Member States have national systems and procedures with an adequate level of
efficiency, there are still a host of identifiable inefficiencies within cross-border
payments. In particular within the European Payment Council, European banks have
made efforts to solve those problems and establish a single payments area, e.g. by
developing technical infrastructure (EBA Step 2) and through involvement in establishing
and implementing procedures and standards (e.g. MT 103+, BIC/IBAN).
An inadequate legal framework at European level is regarded as one reason for inefficiencies
within cross-border retail payments. There are a number of payments-related pieces of
legislation (e.g. Regulation (EC) No 2560/20011, introducing the principle of equal charges
for both national and cross-border euro payments, Directive 97/5/EC2 regulating customer
protection in connection with cross-border payments, and Recommendation 97/489/EC3
safeguarding users of electronic payment instruments), but no coherent legal framework. In
December 2003 the Commission submitted a consultative document which is the culmination
1
OJ L 344, 28.12.2001, p. 13.
OJ L 43, 14.2.1997, p. 25.
3
OJ L 208, 2.8.1997, p. 52.
2
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of longer-term groundwork1 and is intended to result in a regulatory initiative in early summer
2004, though the specific form this will take (type and number of legal instruments) has not
yet been determined, however.
3. Future legal framework for retail payments
In principle, the Commission’s initiative2 to tackle the unsatisfactory situation concerning
retail payments - to enable all citizens to profit in full from the euro and the internal market is welcome. However, there are a host of unresolved issues.
(a) Regulation or self-regulation
Community rules intended to change the status quo in individual Member States always
harbour the risk of disrupting efficient national procedures and should therefore be restricted
to what is necessary. Over regulation must be avoided. Regrettably, the Commission has not
always observed that guiding principle in the consultative document, e.g. the proposed
liability rules (Annex 11-13) or the information requirements (Annex 2).
If European-level regulation is the objective, preference should possibly be given to
regulations rather than directives in order to ensure that application is as uniform as possible,
given in particular that enlargement will bring with it further national rules and procedures.
An attempt should be made, however, to make as much use as possible of the principle of
self-regulation and to restrict regulatory initiatives to the ‘big picture’ and a number of
selected areas (e.g. establishing a European direct-debit scheme). Firstly, self-regulation
presupposes that satisfactory solutions are found to deal with anti-trust implications (e.g.
establishing standards), in order to create legal certainty quickly, and, secondly, market
participants must also make use of the leeway they are given. As the ECB June 2003 progress
report ‘Towards a Single Euro Payments Area’ shows, the banking sector has not always been
sufficiently successful, regrettably, when implementing standards, for instance. If payment
service providers are not in a position to make the necessary moves towards a single payments
area, thought must be given to legislating at European level and/or greater and more tangible
involvement of the Eurosystem in order to resolve the problems.
(b) Market access
With regard to payment system operation, network externalities may turn the provider
structure into an oligopoly. Banks are already merging or outsourcing their payment services.
Although consolidation may also promote efficiency, healthy competition and open market
access for new providers is also needed in the interests of consumer protection.
That raises the question as to who should be allowed to provide payment services in the EU.
At present, licensing arrangements vary in Member States: in some, a full banking licence is
1
Cf. for instance, 'A possible legal framework for the single payment area in the internal market' - Working
document (MARKT/208/2001).
2
A new legal framework for payments in the internal market - Consultative document (COM(2003) 718).
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necessary, while in others it is not. The Commission regards the introduction of a special
licence for non-banks providing payment services as one possible solution. There are
advantages to that solution in ensuring a level playing field and consumer protection. The
question is, however, whether such a distinction - between a full banking licence and a
payments licence - is possible without surrendering prudential supervision standards.
Payments are normally inseparably linked to other banking services (account operation,
lending, guarantees for card-supported transfers), with the exception of providers which carry
out exclusively cash-to-cash transactions involving no credit at any time, issue no cards and
operate no accounts.
(c) Scope
The Commission intends to include both cross-border and purely national payments in the
legal framework. It must be ensured, however, that efficient national systems and procedures
are not impaired by European-level rules and that customers' conditions for national
payments are not worse than before.
With regard to the payment instruments included, the Commission's approach rightly provides
for a legal framework to encourage efficient and largely paperless means of payment (e.g.
transfers, direct debits and card payments) and does not concern itself with cheques or bills of
exchange. Direct debiting in particular, which is a convenient and popular payment method
in many countries, must also be established at European level. The Commission's intention
that the legal framework should eliminate existing legal obstacles is therefore welcome.
(d) Payment service provider liability in the event of defective or unauthorised
execution of payments
Payment service providers are to be made responsible for the correct execution of customer
orders and be required to prove that execution is correct. Liability should extend over the
entire payment chain. With regard to unauthorised payments, the Commission intends (in
Annex 13) to restrict customers' personal contribution to EUR 150 even when they have not
complied with their requirements to give notification. Firstly, the question is why there should
be any European-level legislative intervention at all in the contracting process between
customer and payment service provider; it should continue to be possible to leave assessments
of losses to the parties concerned and/or the courts. Secondly, this would enshrine a principle
forcing the bulk of bank customers to pay high levels of charges for the negligence of
individual customers. Citizens' personal responsibility should be encouraged, rather, and for
that reason action must be taken to press on with the establishment of a single, European-wide
telephone number in order to block payment cards quickly throughout the EU ('Card Stop
Europe').
(e) Payment service provider liability in the event of merchant-customer disputes
The notion that payment service providers should be held to account (Annex 11 to the
consultative document) in the event of merchant-customer disputes (e.g. non-delivery of an
item purchased through distance selling) should be regarded as highly problematic. As a
payment service provider has no way of influencing the contractual relationship between a
customer and a merchant, the objective cannot be to involve the provider in disputes arising
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from that relationship, e.g. by requiring the provider to support a customer in dispute with a
merchant, by supplying information, or even by introducing joint liability of payment service
provider and merchant. Specific withdrawal rules for transfers in connection with distance
selling - rules that would be at odds with early payment finality - would also be impracticable.
The aim of pressing ahead with distance selling and Internet selling throughout Europe is
welcome. However, a completely clear distinction between a basic transaction and a payment
transaction is needed. The development of (optional) safeguard systems should continue to be
left to the market.
(f) Transparency
Establishing transparency for the customer is important. What is vital, however, is not the
volume of information but, rather, quality and comprehensibility. The detailed requirements
to provide information, in Annex 2, are too extensive; there is a risk that important
information for the customer would be lost in the process.
What is essential for customers is, for instance, that there should be complete transparency
concerning charges over the entire transfer chain. The new legal framework must ensure that
hidden charges and loopholes are a thing of the past. In particular, customers must be able to
assume the amount transferred will be credited in full to the recipient's account unless the
recipient has expressly entered into a different arrangement with his bank, in which case the
amount and type of deduction must be clearly disclosed to the recipient.
g) Promoting customer mobility
Charges for closing accounts hamper customer mobility, which is essential for proper
competition. In regulatory terms, however, the introduction of maximum charges for closing
accounts is problematic and therefore should be rejected. What is needed, rather, is complete
transparency concerning all charges payable when an account is closed. In addition, banking
associations should agree on a straightforward, standardised data communications procedure
(e.g. for standing orders and direct debits) when a customer moves accounts, thus encouraging
customer mobility.
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24 February 2004
OPINION OF THE COMMITTEE ON LEGAL AFFAIRS AND THE INTERNAL
MARKET
for the Committee on Economic and Monetary Affairs
on Legal framework for a single payment area
(2003/2101(INI))
Draftsman: Brian Crowley
PROCEDURE
The Committee on Legal Affairs and the Internal Market appointed Brian Crowley draftsman
at its meeting of 1 October 2003.
It considered the draft opinion at its meetings of 27 January 2004 and 19 February 2004.
At the last meeting it adopted the following suggestions unanimously.
The following were present for the vote: Giuseppe Gargani, chairman; Willi Rothley (vicechairman), Ioannis Koukiadis (vice-chairman) and Bill Miller, vice-chairman; Paolo
Bartolozzi, Maria Berger, Janelly Fourtou, Marie-Françoise Garaud, Evelyne Gebhardt, José
María Gil-Robles Gil-Delgado, Malcolm Harbour, Lord Inglewood, Carlos Lage (for Carlos
Candal , pursuant to Rule 153(2)), Kurt Lechner, Klaus-Heiner Lehne, Arlene McCarthy,
Toine Manders, Manuel Medina Ortega, Angelika Niebler (for Bert Doorn), Anne-Marie
Schaffner, Astrid Thors (for Diana Wallis), Marianne L.P. Thyssen, Ian Twinn (for Rainer
Wieland), Joachim Wuermeling and Stefano Zappalà.
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SHORT JUSTIFICATION
An efficient cross-border payment system is essential for the smooth functioning of the single
market.
Citizens and businesses can only benefit fully from it if they are also able to transfer money as
rapidly, reliably and cheaply from one part of the European Union to another as is now the
case within each Member State.
The cost of making cash withdrawals and payments between bank accounts should today be
the same for national for national and cross-border withdrawals and payments.
Be it as it may, the developments of the payments system within the Community are
disappointing. Significant progress is necessary in order to provide customers with a set of
convenient, cheap, reliable and predictable instruments of payment.
The consultative document1 presented by the Commission concerning a new legal framework
for payments in the internal market aims at gathering views and comments on how best to
overhaul the present legal framework.
The Commission asserts that there is still fragmentation between national payment markets on
the one hand, and cross-border payment markets on the other hand.
Your draftsperson welcomes the approach adopted by the consultative document, which seeks
to identify, at Community level, the guiding principles for a future proposal for a new legal
framework for payments in the internal market.
However, your draftsperson wishes to express concern about the following points:
Legal certainty
In order to be able to act responsibly, customers (consumers and other persons, such as
retailers and SMEs) should be fully aware of their rights and obligations. With a view to
ensure transparency, essential information requirements should therefore be harmonised.
Simplification
A clear correlation exists between simplified but binding legislation and good payment
practice. Existing payment legislation leads to confusion due to the overlap of many
provisions. Recasting of payment legislation may be necessary in order to prevent overlaps,
but should be simple and clear.
Security
Electronic means of payment need to be as secure as possible. The risks of fraudulent use and
1 Communication from the Commission to the Council and the European Parliament concerning a New Legal Framework for Payments in the Internal Market,
COM(2003)718.
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counterfeiting should be tackled by continuously improving security.
SUGGESTIONS
The Committee on Legal Affairs and the Internal Market calls on the Committee on
Economic and Monetary Affairs, as the committee responsible, to incorporate the following
points in its motion for a resolution:
1. Notes with concern that payment systems are still subject to diverging national rules
leading to legal uncertainty;
2. Notes that some steps have been achieved at Community level in the matter of payments,
but that the total arsenal of legislation should be aimed, not at securing full legislative
approximation, but at setting minimum norms and standards, in order to inspire customer
confidence;
3. Considers that customers must be provided with a set of convenient, cheap, reliable and
predictable instruments of payment;
4. Emphasizes that customers need to have convenient access to payment services, with
transparent pricing and minimum service levels equal for domestic and cross-border
transactions;
5. Welcomes the fact that, using its right of initiative, the Commission has taken this
opportunity to launch a debate with a view to achieving progress as regards payments;
6. Points out that any proposals for legislative measures must actually lead to simpler, more
understandable and better targeted legislation that will be easier to enforce;
7. Gives high priority to enhancing payment security;
8. Welcomes the incorporation of out-of-court dispute resolution mechanisms in any future
Community payment legislation as a step towards facilitating the speedy, economic
resolution of cross-border disputes;
9. Stresses that in the first instance attempts should be made to solve disputes directly
between the customer and the trader before resorting to extra-judicial solutions;
10. Stresses that the suitability of minimum or maximum harmonising provisions be
appropriately assessed when amending existing legislation, or developing new
comprehensive legislation, on a case by case basis;
11. Considers that it is particularly important to establish a harmonious legal concept covering
the whole spectrum of payments transactions within the internal market, and to boost
consumer confidence, particularly as regards essential information requirements for
payments services;
12. Advocates the establishment of a comprehensive and consistent legal framework on
payments systems and instruments.
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